Beals Bros. Management Corp. - Page 9

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               In plan years after June 30, 1987, petitioner owned all of             
          the issued shares in MFG.  Therefore petitioner and MFG are                 
          members of a controlled group,6 and the provisions of section 410           
          again apply as if MFG and petitioner were a single employer.                
          See, e.g., Achiro v. Commissioner, 77 T.C. 881, 906 (1981).  The            
          combined number of eligible employees of the two companies was              
          seven for the plan year commencing July 1, 1987.  The MGMT ESOP             
          covered only four of seven (57.1 percent) of the eligible                   
          employees.  Because less than 70 percent of the combined                    
          employees of petitioner and MFG were participants in the MGMT               

               6 The definition of a controlled group for these purposes is           
          contained in sec. 1563(a).  Sec. 1563(a) in relevant part                   
                    SEC. 1563(a).  (a) Controlled Group of Corporations.--            
          For purposes of this part, the term “controlled group of                    
          corporations” means any group of–-                                          
                         (1) Parent-subsidiary controlled                             
               group.--One or more chains of corporations connected                   
               through stock ownership with a common parent corporation               
                              (A) stock possessing at least                           
                         80 percent of the total combined                             
                         voting power of all classes of                               
                         stock entitled to vote or at least                           
                         80 percent of the total value of                             
                         shares of all classes of stock of                            
                         each of the corporations, except                             
                         the common parent corporation, is                            
                         owned (within the meaning of                                 
                         subsection (d)(1)) by one or more                            
                         of the other corporations; * * *                             

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