LargeCo owns stock in Small Corporation. The voting shares and value of the Small stock owned by LargeCo are as follows.

• Common stock, 100%.

• Preferred stock, 60%.

Under Small’s corporate bylaws, the board of directors manages all of the entity’s operations and investments. A majority vote of the board is required before any new policy or practice is adopted.

Board members are elected in the following manner: the common shareholders elect five of the eight board members, and the preferred shareholders separately elect the other three directors.

LargeCo would like to file a consolidated tax return with Small. Is the § 1504 stock ownership test met (i.e., does LargeCo own 80% of the voting power and value of the Small stock)? Prepare a memo for your firm’s tax research file that addresses this affiliated group issue.