Lansing Company is owned equally by Jennifer, her husband, Dan, and DeWitt Corporation, which is owned 50 percent by Jennifer and her sister Jane. Each of the three shareholders holds 190 shares in the company. Under the §318 stock attribution rules, how many shares of Lansing stock is DeWitt Corporation deemed to own?

Question

Quizplus · Accepted Answer

Under §318 stock attribution rules, shares owned directly or indirectly by or for a corporation, partnership, estate, or trust shall be considered as being owned proportionately by its shareholders, partners, or beneficiaries. Since DeWitt Corporation is 50% owned by Jennifer, the shares owned by Jennifer (190 shares) are attributed to DeWitt Corporation in addition to its own 190 shares. Similarly, the shares owned by Jane (who owns the other 50% of DeWitt Corporation) are also attributed to DeWitt Corporation. However, since Jane does not directly own any shares in Lansing Company, only Jennifer's shares are attributed to DeWitt. Therefore, DeWitt is deemed to own its own 190 shares plus Jennifer's 190 shares, totaling 380 shares. However, the question's premise is slightly misleading because it doesn't explicitly state Jane owns shares directly in Lansing Company, which would be necessary for DeWitt to be attributed more shares. Given the information provided, the correct interpretation under §318 would indeed result in DeWitt Corporation being deemed to own 570 shares (its own 190 shares, plus Jennifer's 190 shares, and Dan's 190 shares because Dan's shares are attributed to Jennifer and then to DeWitt Corporation through Jennifer's ownership). This oversight in the explanation highlights the complexity of §318 attribution rules and the importance of considering all indirect ownerships.

Lansing Company Is Owned Equally by Jennifer, Her Husband, Dan