The ownership of an individual who owns less than five percent of the stock of a loss corporation, directly or indirectly, is combined with other such individuals or entities to form a public group. This type of an individual shareholder is called a “public owner”. Consequently, the stock owned by such individuals is treated as owned by one 5-percent shareholder of the loss corporation, i.e., public group.
See Treas. Reg. §§ 1.382-2T(j)(1)(i) and 1.382-2T(f)(12). See also IRC § 382(g)(4).