Mr.S owns 40 percent of R Corporation and 60 percent of T Corporation.T owns 30 percent of R.Under the constructive ownership rules of § 318, T Corporation is treated as owning 54 percent of R.

Question

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Under § 318 constructive ownership rules, T Corporation's 30 percent direct ownership in R plus the 40 percent ownership of R by Mr. S (which is attributed to T Corporation because Mr. S owns 60 percent of T Corporation) results in a total of 70 percent ownership of R by T Corporation, not 54 percent.

MrS Owns 40 Percent of R Corporation and 60 Percent