Treasury Regulations · 26 CFR
§ 1.544-3. Constructive ownership by reason of family and partnership ownership.
Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).
Regulation under 26 U.S.C. § 544
Cite as 26 CFR § 1.544-3
At a glance
Read from the text and its source citation. Not part of the regulation.
- Status
- In the current eCFR
- Source
- T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960; T.D. 9989, 89 FR 17606, Mar. 11, 2024, unless otherwise noted.
- Issued under
- 26 U.S.C. § 544
- Length
- 370 words · about 2 min to read
- Cross-references
- cites 1 Code section and 2 regulations; cited by 1
The M Corporation at some time during the last half of the taxable year, had 1,800 shares of outstanding stock, 450 of which were held by various individuals having no relationship to one another and none of whom were partners, and the remaining 1,350 were held by 51 shareholders as follows:
| Relationships | Shares | Shares | Shares | Shares | Shares |
|---|---|---|---|---|---|
| An individual | (A)100 | (B)20 | (C)20 | (D)20 | (E)20 |
| His father | (AF)10 | (BF)10 | (CF)10 | (DF)10 | (EF)10 |
| His wife | (AW)10 | (BW)40 | (CW)40 | (DW)40 | (EW)40 |
| His brother | (AB)10 | (BB)10 | (CB)10 | (DB)10 | (EB)10 |
| His son | (AS)10 | (BS)40 | (CS)40 | (DS)40 | (ES)40 |
| His daughter by former marriage (son's | |||||
| half-sister) | (ASHS)10 | (BSHS)40 | (CSHS)40 | (DSHS)40 | (ESHS)40 |
| His brother's wife | (ABW)10 | (BBW)10 | (CBW)10 | (DBW)160 | (EBW)10 |
| His wife's father | (AWF)10 | (BWF)10 | (CWF)110 | (DWF)10 | (EWF)10 |
| His wife's brother | (AWB)10 | (BWB)10 | (CWB)10 | (DWB)10 | (EWB)10 |
| His wife's brother's wife | (AWBW)10 | (BWBW)10 | (CWBW)10 | (DWBW)10 | (EWBW)110 |
| Individual's partner | (AP)10 |
By applying the statutory rule provided in section 544(a)(2) five individuals own more than 50 percent of the outstanding stock as follows:
| A (including AF, AW, AB, AS, ASHS, AP) | 160 |
| B (including BF, BW, BB, BS, BSHS) | 160 |
| CW (including C, CS, CWF, CWB) | 220 |
| DB (including D, DF, DBW) | 200 |
| EWB (including EW, EWF, EWBW) | 170 |
| Total, or more than 50 percent | 910 |
Individual A represents the obvious case where the head of the family owns the bulk of the family stock and naturally is the head of the group. A's partner owns 10 shares of the stock. Individual B represents the case where he is still head of the group because of the ownership of stock by his immediate family. Individuals C and D represent cases where the individuals fall in groups headed in C's case by his wife and in D's case by his brother because of the preponderance of holdings on the part of relatives by marriage. Individual E represents the case where the preponderant holdings of others eliminate that individual from the group.
Cross-references
Computed from the citations in the text of 26 CFR.
Code sections it cites
Regulations it cites
Cited by 1 other regulation
Where it sits in 26 CFR
- Subchapter A Income tax
- Part 1 Income taxes
- Personal Holding Companies
Nearby sections
- § 1.543-1 Personal holding company income.
- § 1.543-2 Limitation on gross income and personal holding company income in transactions involving stocks, securities, and commodities.
- § 1.544-1 Constructive ownership.
- § 1.544-2 Constructive ownership by reason of indirect ownership.
- § 1.544-3 Constructive ownership by reason of family and partnership ownership.
- § 1.544-4 Options.
- § 1.544-5 Convertible securities.
- § 1.544-6 Constructive ownership as actual ownership.
- § 1.544-7 Option rule in lieu of family and partnership rule.