[Shawn]

Hello guys! I am taking reg exam in about 10 days and I desperately need your help on a couple of topics on reg.

1. Constructive Ownership – Are brother’s and sister’s ownership excluded?

I am studying with both Ninja and Gleim, and explanations on a few mcqs from Gleim mention that brother’s and/or sister’s ownership are excluded from the constructive ownership rules. However, when I read Wiley or other books, they say brother’s and sister’s ownership are included in the rules. Who is right on this one? Gleim or Wiley?

2. Holding period of related party transactions

Let’s say a mother sells her property to her son and her son subsequently sells it to a third party for a gain. Then does mother’s holding period gets added to the son’s holding period? Or if that’s not the case, does the holding period start when the son acquires the property from his mother?

Thank you guys in advance.

[Namstut]

CONSTRUCTIVE OWNERSHIP DEFINITION:

You are considered to constructively own a stock if it is owned by any of the following persons or entities:

1. A spouse (unless you are legally separated under a decree of divorce or separate maintenance)

2. A child (including adopted children)

3. A grandchild

4. A parent

5. A partnership of which you are a member (in proportion to your percentage interest)

6. A trust which you own or of which you are the beneficiary (in proportion to your actuarial interest)

7. A corporation if you own half or more of the stock (in proportion to your percentage interest)

8. Shares that you are entitled to acquire by exercising an option, warrant, conversion, or exchange of a security

Holding Period:

Holding period of mother can't be added to the holding period of her son when she transfers or sells the asset. Holding period “tacking” is not allowed between related parties.

he buyer's holding period starts on the date of purchase for a related party transaction.

For an inheritance, the person who sells the inherited property, the gain/loss is always long term irrespective of the actual holding period.

For gifted property, the holding period depends on what you use to determine the donee's basis:

if donee's basis is the donor's basis, then donee's holding period is same as the donor's holding period
if donee's basis is the FMV on the date of gift, then the donee's holding period starts on the date of gift.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[Shawn]

Thank you so much

[Author]

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