Your Ask Joey ™ Answer

What is constructive ownership of stock?

Constructive ownership basically addresses the concept that you are so closely related to the real owner that the IRS says you should be treated like an owner. The IRS lists out several scenarios that could indicate constructive ownership:

Scenario #1: The stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries;

Scenario #2: An individual shall be considered as owning the stock if it is owned, directly, or indirectly, by their family;

Scenario #3: An individual owning any stock in a corporation shall be considered as owning the stock if it is owned directly or indirectly by their partner;

Scenario #4: The family of an individual shall include only his brothers and sisters, spouse, ancestors, and lineal descendants;


Back To All Questions

You might also be interested in...

  • CECL Excel Workbook

    If you would like to use the Excel workbook that was used to create the Universal CPA lecture on CECL for debt securities, please click the link below to download the Excel workbook: CECL Calculation workbook (Universal CPA Review)

  • Journal Entry for Direct Materials Variance

    Journal Entry for Direct Materials Variance In the current year, Mission Burrito budgeted 6,000 pounds of production and actually used 4,000 pounds. Material cost was budgeted for $5 per pound and the actual cost was $8 per pound. What would the debit or credit to the direct material efficiency variance account be for the current...

  • Understanding Variance Analysis

    Variance Analysis Variance analysis is a method for companies to compare its actual performance vs its budgeted amount for that cost measurement (related to the flexible budget). The differences between the standard (budgeted) amount of cost and the actual amount that the organization incurs is referred to as a variance. By analyzing variances, the company...