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TITLE 26-INTERNAL REVENUE CODE Distributions of property, see section 301 of this title. Redemptions treated as distributions of property, see section 302 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 301, 302, 306, 593 of this title. § 318. Constructive ownership of stock (a) General rule For purposes of those provisions of this sub- chapter to which the rules contained in this section are expressly made applicable- (1) Members of family (A) In general An individual shall be considered as owning the stock owned, directly or Indi- rectly, by or for- (i) his spouse (other than a spouse who is legally separated from the individual under a decree of divorce or separate maintenance), and (Ii) his children, grandchildren, and par- ents. (B) Effect of adoption For purposes of subparagraph (A)(il), a le- gally adopted child of an individual shall be treated as a child of such individual by blood. (2) Attribution from partnerships, estates, trusts, and corporations (A) From partnerships and estates Stock owned, directly or indirectly, by or for a partnership or estate shall be consid- ered as owned proportionately by its part- ners or beneficiaries. (B) From trusts (I) Stock owned, directly or indirectly, by or for a trust (other than an employ- ees' trust described in section 401(a) which is exempt from tax under section 501(a)) shall be considered as owned by its beneficiaries in proportion to the actuar- ial interest of such beneficiaries in such trust. (ii) Stock owned, directly or indirectly, by or for any portion of a trust of which a person is considered the owner under sub- part E of part I of subchapter J (relating to grantors and others treated as substan- tial owners) shall be considered as owned by such person. (C) From corporations If 50 percent or more in value of the stock in a corporation is owned, directly or indi- rectly, by or for any person, such person shall be considered as owning the stock owned, directly or indirectly, by or for such corporation, in that proportion which the value of the stock which such person so owns bears to the value of all the stock in such corporation. (3) Attribution to partnerships, estates, trusts, and corporations (A) To partnerships and estates Stock owned, directly or indirectly, by or for a partner or a beneficiary of an estate shall be considered as owned by the part- nership or estate. (B) To trusts (i) Stock owned, directly or indirectly, by or for a beneficiary of a trust (other than an employees' trust described in sec- tion 401(a) which is exempt from tax under section 501(a)) shall be considered as owned by the trust, unless such benefi- ciary's interest in the trust is a remote contingent interest. For purposes of this clause, a contingent interest of a benefi- ciary in a trust shall be considered remote if, under the maximum exercise of discre- tion by the trustee in favor of such bene- ficiary, the value of such interest, com- puted actuarially, is 5 percent or less of the value of the trust property. (i1) Stock owned, directly or indirectly, by or for a person who is considered the owner of any portion of a trust under sub. part E of part I of subchapter J (relating to grantors and others treated as substan- tial owners), shall be considered as owned by the trust. (C) To corporations If 50 percent or more in value of the stock in a corporation is owned, directly or indi- rectly, by or for any person, such corpora- tion shall be considered as owning the stock owned, directly or indirectly, by or for such person. (4) Options If any person has an option to acquire stock, such stock shall be considered as owned by such person. For purposes of this para- graph, an option to acquire such an option, and each one of a series of such options, shall be considered as an option to acquire such stock. (5) Operating rules (A) In general Except as provided in subparagraphs (B) and (C), stock constructively owned by a person by reason of the application of para- graph (1), (2), (3), or (4), shail, for purposes of applying paragraphs (1), (2), (3), and (4), be considered as actually owned by such person. (B) Members of family Stock constructively owned by an individ- ual by reason of the application of para- graph (1) shall not be considered as owned by him for purposes of again applying para- graph (1) in order to make another the con- structive owner of such stock. (C) Partnerships, estates, trusts, and corporations Stock constructively owned by a partner- ship, estate, trust, or corporation by reason of the application of paragraph (3) shall not be considered as owned by it for purposes of applying paragraph (2) in order to make an- other the constructive owner of such stock. (D) Option rule in lieu of family rule For purposes of this paragraph, if stock may be considered as owned by an individ- ual under paragraph (1) or (4), it shall be considered as owned by him under para- graph (4). Page 246 § 318