PUBLIC LAW 107-16-JUNE 7, 2001 115 STAT. 133 member of such person's family with deemed-owned shares shall be treated as a disqualified person if not otherwise treated as a disqualified person under subparagraph (A). " (C) DEEMED-OWNED SHARES.— "(i) IN GENERAL. —The term 'deemed-owned shares' means, with respect to any person— "(I) the stock in the S corporation constituting employer securities of an employee stock ownership plan which is allocated to such person under the plan, and "(II) such person's share of the stock in such corporation which is held by such plan but which is not allocated under the plan to participants. " (ii) PERSON'S SHARE OF UNALLOCATED STOCK.— For purposes of clause (i)(II), a person's share of unallocated S corporation stock held by such plan is the amount of the unallocated stock which would be allocated to such person if the unallocated stock were allocated to all participants in the same proportions as the most recent stock allocation under the plan. "(D) MEMBER OF FAMILY.—For purposes of this paragraph, the term 'member of the family' means, with respect to any individual— "(i) the spouse of the individual, "(ii) an ancestor or lineal descendant of the individual or the individual's spouse, "(iii) a brother or sister of the individual or the individual's spouse and any lineal descendsmt of the brother or sister, and "(iv) the spouse of any individual described in clause (ii) or (iii). A spouse of an individual who is legally separated from such individual under a decree of divorce or separate maintenance shall not be treated as such individual's spouse for purposes of this subparagraph. "(5) TREATMENT OF SYNTHETIC EQUITY. —For purposes of paragraphs (3) and (4), in the case of a person who owns synthetic equity in the S corporation, except to the extent provided in regulations, the shares of stock in such corporation on which such synthetic equity is based shall be treated as outstanding stock in such corporation and deemed-owned shares of such person if such treatment of synthetic equity of 1 or more such persons results in— "(A) the treatment of any person as a disqualified person, or "(B) the treatment of any year as a nonallocation year. For purposes of this paragraph, synthetic equity shall be treated as owned by a person in the same manner as stock is treated as owned by a person under the rules of paragraphs (2) and (3) of section 318(a). If, without regard to this paragraph, a person is treated as a disqualified person or a year is treated as a nonallocation year, this paragraph shall not be construed to result in the person or year not being so treated. "(6) DEFINITIONS.— For purposes of this subsection— "(A) EMPLOYEE STOCK OWNERSHIP PLAN.— The term 'employee stock ownership plan' has the meaning given such term by section 4975(e)(7).
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