Your client, Everest Corporation, is a major company with significant investment in smaller firms. You explain that ERISA treats companies with a certain percentage of overlapping ownership as a single employer for purposes of qualified plan rules (e.g., participation, vesting, nondiscrimination, deductions). Which of the following relationships would be considered a control group by the IRS?

(1) Everest owns 80% of the corporate stock in Company H

(2) Everest owns 80% of the corporate stock in Company H which owns 80% of the corporate stock in Company J

(3) Everest owns 50% of the corporate stock in Company K.

1, 2 and 3

2 and 3

1 and 2

1 only