nonallocation year
(3) Nonallocation year For purposes of this subsection— (A) In general The term “nonallocation year” means any plan year of an employee stock ownership plan if, at any time during such plan year— (i) such plan holds employer securities consisting of stock in an S corporation, and (ii) disqualified persons own at least 50 percent of the number of shares of stock in the S corporation. (B) Attribution rules For purposes of subparagraph (A)— (i) In general The rules of section 318(a) shall apply for purposes of determining ownership, except that— (I) in applying paragraph (1) thereof, the members of an individual’s family shall include members of the family described in paragraph (4)(D), and (II) paragraph (4) thereof shall not apply. (ii) Deemed-owned shares Notwithstanding the employee trust exception in section 318(a)(2)(B)(i), an individual shall be treated as owning deemed-owned shares of the individual. Solely for purposes of applying paragraph (5), this subparagraph shall be applied after the attribution rules of paragraph (5) have been applied.