Question

Wakanda Corporation has 1,000 shares of stock outstanding. T’Challa owns 250 shares, T’Challa’s father, T’Chaka, owns 250 shares, T’Challa’s son, Azari, owns 200 shares, and T’Challa’s half-sister, Shuri, owns 150 shares. Dora Milaje Corporation owns the other 150 shares in Wakanda Corporation. T’Challa owns 80% of the stock in Dora Milaje Corporation. Applying the § 318 stock attribution rules, how many shares does T’Challa own in Wakanda Corporation?

Answer 1

26 U.S. Code § 318 specifies the rules for Constructive ownership of stock. According to such rules -

1. an individual shall be deemed to own a stock held by his family member, which includes spouse, parents, children (whether adopted or not) and grand children; and
2. an individual shall be deemed to own a stock in the proportion he own stock of another corporation (only if own more than 50% of stock) which owns the stock under consideration.

Applying the above rules, ownership of T'Challa shall be as under:

T'Challa own shares 250 shares

Add: T'Challa's father shares 250 shares

Add: T'Challa's son shares 200 shares

Add: Holding of Dora Milaje Corporation (80% of 150 shares) 120 shares

Total ownership of T'Challa in Wakanda Corporation 820 shares