§542 — Definition of personal holding company
67 citing cases
Statute Text — 26 U.S.C. §542
For purposes of this subtitle, the term “personal holding company” means any corporation (other than a corporation described in subsection (c)) if—
At least 60 percent of its adjusted ordinary gross income (as defined in section 543(b)(2)) for the taxable year is personal holding company income (as defined in section 543(a)), and
At any time during the last half of the taxable year more than 50 percent in value of its outstanding stock is owned, directly or indirectly, by or for not more than 5 individuals. For purposes of this paragraph, an organization described in section 401(a), 501(c)(17), or 509(a) or a portion of a trust permanently set aside or to be used exclusively for the purposes described in section 642(c) or a corresponding provision of a prior income tax law shall be considered an individual.
In the case of an affiliated group of corporations filing or required to file a consolidated return under section 1501 for any taxable year, the adjusted ordinary gross income requirement of subsection (a)(1) of this section shall, except as provided in paragraphs (2) and (3), be applied for such year with respect to the consolidated adjusted ordinary gross income and the consolidated personal holding company income of the affiliated group. No member of such an affiliated group shall be considered to meet such adjusted ordinary gross income requirement unless the affiliated group meets such requirement.
Paragraph (1) shall not apply to an affiliated group of corporations if—
any member of the affiliated group of corporations (including the common parent corporation) derived 10 percent or more of its adjusted ordinary gross income for the taxable year from sources outside the affiliated group, and
80 percent or more of the amount described in subparagraph (A) consists of personal holding company income (as defined in section 543).
For purposes of this paragraph, section 543 shall be applied as if the amount described in subparagraph (A) were the adjusted ordinary gross income of the corporation.
Paragraph (1) shall not apply to an affiliated group of corporations if any member of the affiliated group (including the common parent corporation) is a corporation excluded from the definition of personal holding company under subsection (c).
In applying paragraph (2) (A) and (B), personal holding company income and adjusted ordinary gross income shall not include dividends received by a common parent corporation from another corporation if—
the common parent corporation owns, directly or indirectly, more than 50 percent of the outstanding voting stock of such other corporation, and
such other corporation is not a personal holding company for the taxable year in which the dividends are paid.
In the case of an affiliated group of corporations filing or required to file a consolidated return under section 1501 for any taxable year, there shall be excluded from consolidated personal holding company income and consolidated adjusted ordinary gross income for purposes of this part dividends received by a member of the affiliated group from a life insurance company taxable under section 801 that is not a member of the affiliated group solely by reason of the application of paragraph (2) of subsection (b) of section 1504.
The term “personal holding company” as defined in subsection (a) does not include—
a corporation exempt from tax under subchapter F (sec. 501 and following);
a bank as defined in section 581, or a domestic building and loan association within the meaning of section 7701(a)(19);
a life insurance company;
a surety company;
a foreign corporation;
a lending or finance company if—
60 percent or more of its ordinary gross income (as defined in section 543(b)(1)) is derived directly from the active and regular conduct of a lending or finance business;
the personal holding company income for the taxable year (computed without regard to income described in subsection (d)(3) and income derived directly from the active and regular conduct of a lending or finance business, and computed by including as personal holding company income the entire amount of the gross income from rents, royalties, produced film rents, and compensation for use of corporate property by shareholders) is not more than 20 percent of the ordinary gross income;
the sum of the deductions which are directly allocable to the active and regular conduct of its lending or finance business equals or exceeds the sum of—
15 percent of so much of the ordinary gross income derived therefrom as does not exceed $500,000, plus
5 percent of so much of the ordinary gross income derived therefrom as exceeds $500,000; and
the loans to a person who is a shareholder in such company during the taxable year by or for whom 10 percent or more in value of its outstanding stock is owned directly or indirectly (including, in the case of an individual, stock owned by members of his family as defined in section 544(a)(2)), outstanding at any time during such year do not exceed $5,000 in principal amount;
a small business investment company which is licensed by the Small Business Administration and operating under the Small Business Investment Act of 1958 (
15 U.S.C. 661
and following) and which is actively engaged in the business of providing funds to small business concerns under that Act. This paragraph shall not apply if any shareholder of the small business investment company owns at any time during the taxable year directly or indirectly (including, in the case of an individual, ownership by the members of his family as defined in section 544(a)(2)) a 5 per centum or more proprietary interest in a small business concern to which funds are provided by the investment company or 5 per centum or more in value of the outstanding stock of such concern; and
a corporation which is subject to the jurisdiction of the court in a title 11 or similar case (within the meaning of section 368(a)(3)(A)) unless a major purpose of instituting or continuing such case is the avoidance of the tax imposed by section 541.
Except as provided in subparagraph (B), for purposes of subsection (c)(6), the term “lending or finance business” means a business of—
making loans,
purchasing or discounting accounts receivable, notes, or installment obligations,
rendering services or making facilities available in connection with activities described in clauses (i) and (ii) carried on by the corporation rendering services or making facilities available, or
rendering services or making facilities available to another corporation which is engaged in the lending or finance business (within the meaning of this paragraph), if such services or facilities are related to the lending or finance business (within such meaning) of such other corporation and such other corporation and the corporation rendering services or making facilities available are members of the same affiliated group (as defined in section 1504).
For purposes of subparagraph (A), the term “lending or finance business” does not include the business of—
making loans, or purchasing or discounting accounts receivable, notes, or installment obligations, if (at the time of the loan, purchase, or discount) the remaining maturity exceeds 144 months; unless—
the loans, notes, or installment obligations are evidenced or secured by contracts of conditional sale, chattel mortgages, or chattel lease agreements arising out of the sale of goods or services in the course of the borrower’s or transferor’s trade or business, or
the loans, notes, or installment obligations are made or acquired by the taxpayer and meet the requirements of subparagraph (C), or
making loans evidenced by, or purchasing, certificates of indebtedness issued in a series, under a trust indenture, and in registered form or with interest coupons attached.
For purposes of clause (i), the remaining maturity shall be treated as including any period for which there may be a renewal or extension under the terms of an option exercisable by the borrower.
For purposes of subparagraph (B)(i), a loan, note, or installment obligation meets the requirements of this subparagraph if it is made under an agreement—
under which the creditor agrees to make loans or advances (not in excess of an agreed upon maximum amount) from time to time to or for the account of the debtor upon request, and
under which the debtor may repay the loan or advance in full or in installments.
For purposes of subsection (c)(6)(C), the deductions which may be taken into account shall include only—
deductions which are allowable only by reason of section 162 or section 404, except there shall not be included any such deduction in respect of compensation for personal services rendered by shareholders (including members of the shareholder’s family as described in section 544(a)(2)), and
deductions allowable under section 167, and deductions allowable under section 164 for real property taxes, but in either case only to the extent that the property with respect to which such deductions are allowable is used directly in the active and regular conduct of the lending or finance business.
For purposes of subsection (c)(6)(B), in the case of a lending or finance company which meets the requirements of subsection (c)(6)(A), there shall not be treated as personal holding company income the lawful income received from a corporation which meets the requirements of subsection (c)(6) and which is a member of the same affiliated group (as defined in section 1504) of which such company is a member.
Treasury Regulations
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Treas. Reg. §1.542-1General rule
A personal holding company is any corporation (other than one specifically excepted under section 542(c)) which, for the taxable year, meets:
(a) The gross income requirement specified in section 542(a)(1) and § 1.542-2, and
(b) The stock ownership requirement specified in section 542(a)(2) and § 1.542-3.
Both requirements must be satisfied with respect to each taxable year.
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Treas. Reg. §1.542-1(a)The gross income requirement specified in section 542(a)(1) and § 1.
The gross income requirement specified in section 542(a)(1) and § 1.542-2, and
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Treas. Reg. §1.542-1(b)The stock ownership requirement specified in section 542(a)(2) and § 1.
The stock ownership requirement specified in section 542(a)(2) and § 1.542-3.
Both requirements must be satisfied with respect to each taxable year.
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Treas. Reg. §1.542-2Gross income requirement
To meet the gross income requirement it is necessary that at least 80 percent of the total gross income of the corporation for the taxable year be personal holding company income as defined in section 543 and §§ 1.543-1 and 1.543-2. For the definition of gross income see section 61 and §§ 1.61-1 through 1.61-14. Under such provisions gross income is not necessarily synonymous with gross receipts. Further, in the case of transactions in stocks and securities and in commodities transactions, gross income for personal holding company tax purposes shall include only the excess of gains over losses from such transactions. See section 543(b), paragraph (b) (5) and (6) of § 1.543-1 and § 1.543-2. For determining the character of the amount includible in gross income under section 951(a), see paragraph (a) of § 1.951-1.
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Treas. Reg. §1.542-3Stock ownership requirement
(a) General rule. To meet the stock ownership requirement, it is necessary that at some time during the last half of the taxable year more than 50 percent in value of the outstanding stock of the corporation be owned, directly or indirectly, by or for not more than 5 individuals. Any organization or trust to which subparagraph (1) of this paragraph applies shall be considered as one individual for purposes of this stock ownership requirement subject, however, to the exception in subparagraph (2) of this paragraph which is applicable only to taxable years beginning after December 31, 1954. Thus, if an organization or trust which is considered as an individual owns 51 percent in value of the outstanding stock of the corporation at any time during the last half of the taxable year, the stock ownership requirement will be met by ownership of the required percentage by one individual. See section 544 and §§ 1.544-1 through 1.544-7 for the determination of stock ownership.
(1) An organization or trust considered as an individual. Any of the following organizations or trusts shall be considered as an individual:
(i) An organization to which section 503 applies, namely, any organization described in section 501(c)(3) (relating to charitable, etc., organizations) or section 401(a) (relating to employees' pension trust, etc.) other than an organization excepted from the application of section 503 by paragraphs (1) to (5) of section 503(b). Therefore, a religious organization (other than a trust) excepted under section 503(b)(1) is not considered an individual for purposes of the stock ownership requirement of section 542(a)(2).
(ii) A portion of a trust permanently set aside or to be used exclusively for the purposes described in section 642(c), relating to amounts set aside for charitable purposes, or described in a corresponding provision of the prior income tax law (such as section 162(a), Internal Revenue Code of 1939).
(2) Exception. For taxable years beginning after December 31, 1954, an organization or trust to which subparagraph (1) of this paragraph applies shall not be considered an individual if all of the following conditions are met:
(i) It was organized or created before July 1, 1950.
(ii) At all times on or after July 1, 1950, and before the close of the taxable year, it owned all of the common stock and at least 80 percent of the total number of shares of all other classes of stock of the corporation.
(iii) For the taxable year it is not denied exemption under section 504(a) or the unlimited charitable deduction under section 681(c). In determining whether, for the purpose of section 542(a)(2), exemption is not denied under section 504(a) or the unlimited charitable deduction is not denied under section 681(c) all the income of the corporation which is available for distribution as dividends to its shareholders shall be deemed to have been distributed at the close of the taxable year whether or not any portion of such income was in fact distributed. If the amounts described in section 504(a) or section 681(c), increased by the income of the corporation deemed distributed pursuant to the preceding sentence, would be sufficient to deny exemption or the unlimited charitable deduction, the organization or trust will be considered to be an individual for the purpose of section 542(a)(2). For the purpose of this subdivision the restrictions in sections 504(a)(1) and 681(c)(1) against unreasonable accumulations will not apply to income attributable to property of a decedent dying before January 1, 1951, which was transferred during his lifetime to a trust or property that was transferred under his will to such trust, and
(iv) This subparagraph is illustrated by the following example:
(b) Changes in stock outstanding. It is necessary to consider any change in the stock outstanding during the last half of the taxable year, whether in the number of shares or classes of stock, or in the ownership thereof. Stock subscribed and paid for will be considered as stock outstanding, whether or not such stock is evidenced by issued certificates. Treasury stock shall not be considered as stock outstanding.
(c) Value of stock outstanding. The value of the stock outstanding shall be determined in the light of all the circumstances. The value may be determined upon the basis of the company's net worth, earning and dividend paying capacity, appreciation of assets, together with such other factors as have a bearing upon the value of the stock. If the value of the stock is greatly at variance with that reflected by the corporate books, the evidence of such value should be filed with the return. In any case where there are two or more classes of stock outstanding, the total value of all the stock should be allocated among the different classes according to the relative value of each class.
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Treas. Reg. §1.542-3(a)General rule.
General rule. To meet the stock ownership requirement, it is necessary that at some time during the last half of the taxable year more than 50 percent in value of the outstanding stock of the corporation be owned, directly or indirectly, by or for not more than 5 individuals. Any organization or trust to which subparagraph (1) of this paragraph applies shall be considered as one individual for purposes of this stock ownership requirement subject, however, to the exception in subparagraph (2) of this paragraph which is applicable only to taxable years beginning after December 31, 1954. Thus, if an organization or trust which is considered as an individual owns 51 percent in value of the outstanding stock of the corporation at any time during the last half of the taxable year, the stock ownership requirement will be met by ownership of the required percentage by one individual. See section 544 and §§ 1.544-1 through 1.544-7 for the determination of stock ownership.
(1) An organization or trust considered as an individual. Any of the following organizations or trusts shall be considered as an individual:
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Treas. Reg. §1.542-3(b)Changes in stock outstanding.
Changes in stock outstanding. It is necessary to consider any change in the stock outstanding during the last half of the taxable year, whether in the number of shares or classes of stock, or in the ownership thereof. Stock subscribed and paid for will be considered as stock outstanding, whether or not such stock is evidenced by issued certificates. Treasury stock shall not be considered as stock outstanding.
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Treas. Reg. §1.542-3(c)Value of stock outstanding.
Value of stock outstanding. The value of the stock outstanding shall be determined in the light of all the circumstances. The value may be determined upon the basis of the company's net worth, earning and dividend paying capacity, appreciation of assets, together with such other factors as have a bearing upon the value of the stock. If the value of the stock is greatly at variance with that reflected by the corporate books, the evidence of such value should be filed with the return. In any case where there are two or more classes of stock outstanding, the total value of all the stock should be allocated among the different classes according to the relative value of each class.
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Treas. Reg. §1.542-3(i)It was organized or created before July 1, 1950.
It was organized or created before July 1, 1950.
(ii) At all times on or after July 1, 1950, and before the close of the taxable year, it owned all of the common stock and at least 80 percent of the total number of shares of all other classes of stock of the corporation.
(iii) For the taxable year it is not denied exemption under section 504(a) or the unlimited charitable deduction under section 681(c). In determining whether, for the purpose of section 542(a)(2), exemption is not denied under section 504(a) or the unlimited charitable deduction is not denied under section 681(c) all the income of the corporation which is available for distribution as dividends to its shareholders shall be deemed to have been distributed at the close of the taxable year whether or not any portion of such income was in fact distributed. If the amounts described in section 504(a) or section 681(c), increased by the income of the corporation deemed distributed pursuant to the preceding sentence, would be sufficient to deny exemption or the unlimited charitable deduction, the organization or trust will be considered to be an individual for the purpose of section 542(a)(2). For the purpose of this subdivision the restrictions in sections 504(a)(1) and 681(c)(1) against unreasonable accumulations will not apply to income attributable to property of a decedent dying before January 1, 1951, which was transferred during his lifetime to a trust or property that was transferred under his will to such trust, and
(iv) This subparagraph is illustrated by the following example:
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Treas. Reg. §1.542-4Corporations filing consolidated returns
(a) General rule. A consolidated return under section 1501 shall determine the application of the personal holding company tax to the group and to any member thereof on the basis of the consolidated gross income and consolidated personal holding company income of the group, as determined under the regulations prescribed pursuant to section 1502 (relating to consolidated returns); however, this rule shall not apply to either (1) an ineligible affiliated group as defined in section 542(b)(2) and paragraph (b) of this section, or (2) an affiliated group of corporations a member of which is excluded from the definition of a personal holding company under section 542(c) and paragraph (c) of this section. Thus, in the latter two instances the gross income requirement provided in section 542(a)(1) and § 1.542-2 shall apply to each individual member of the affiliated group of corporations.
(b) Ineligible affiliated group. (1) Except for certain affiliated railroad corporations, as provided in subparagraph (2) of this paragraph, an affiliated group of corporations is an ineligible affiliated group and therefore may not use its consolidated gross income and consolidated personal holding company income to determine the liability of the group or any member thereof for personal holding company tax (as provided in paragraph (a) of this section), if (i) any member of such group, including the common parent, derived gross income from sources outside the affiliated group for the taxable year in an amount equal to 10 percent or more of its gross income from all sources for that year and (ii) 80 percent or more of the gross income from sources outside the affiliated group consists of personal holding company income as defined in section 543 and §§ 1.543-1 and 1.543-2. For purposes of subdivision (i) of this subparagraph gross income shall not include certain dividend income receivedby a common parent from a corporation not a member of the affiliated group which qualifies under section 542(b)(4) and paragraph (d) of this section. See particularly the examples contained in paragraph (d)(2) of this section. Intercorporate dividends received by members of the affiliated group (including the common parent) are to be included in the gross income from all sources for purposes of the test in subdivision (i) of this subparagraph. For purposes of subdivision (ii) of this subparagraph, section 543 and paragraph (a) of § 1.543-1 shall be applied as if the amount of gross income derived from sources outside the affiliated group by a corporation which is a member of such group is the gross income of such corporation.
(2) An affiliated group of railroad corporations shall not be considered to be an ineligible affiliated group, notwithstanding any other provisions of section 542(b)(2) and this paragraph, if the common parent of such group would be eligible to file a consolidated return under section 141 of the Internal Revenue Code of 1939 prior to its amendment by the Revenue Act of 1942 (56 Stat. 798).
(3) See section 562(d) and § 1.562-3 for dividends paid deduction in the case of a distribution by a member of an ineligible affiliated group.
(4) The determination of whether an affiliated group of corporations is an ineligible group under section 542(b)(2) and this paragraph, may be illustrated by the following examples:
(c) Excluded corporations. The general rule for determining liability of an affiliated group under paragraph (a) of this section shall not apply if any member thereof is a corporation which is excluded, under section 542(c), from the definition of a personal holding company.
(d) Certain dividend income received by a common parent. (1) Dividends received by the common parent of an affiliated group from a corporation which is not a member of the affiliated group shall not be included in gross income or personal holding company income, for the purpose of the test under section 542(b)(2):
(i) If such common parent owned, directly or indirectly, more than 50 percent of the outstanding voting stock of the dividend paying corporation at the time such common parent became entitled to the dividend, and
(ii) If the dividend paying corporation is not a personal holding company for the taxable year in which the dividends are paid
Thus, if the tests in subdivisions (i) and (ii) of this subparagraph are met, the dividend income received by the common parent from such other corporation will not be considered gross income for purposes of the test in section 542(b)(2)(A) (paragraph (b) of this section), that is, either to determine gross income from sources outside the affiliated group or to determine gross income from all sources.
(2) The application of subparagraph (1) of this paragraph may be illustrated by the following examples:
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Treas. Reg. §1.542-4(a)General rule.
General rule. A consolidated return under section 1501 shall determine the application of the personal holding company tax to the group and to any member thereof on the basis of the consolidated gross income and consolidated personal holding company income of the group, as determined under the regulations prescribed pursuant to section 1502 (relating to consolidated returns); however, this rule shall not apply to either (1) an ineligible affiliated group as defined in section 542(b)(2) and paragraph (b) of this section, or (2) an affiliated group of corporations a member of which is excluded from the definition of a personal holding company under section 542(c) and paragraph (c) of this section. Thus, in the latter two instances the gross income requirement provided in section 542(a)(1) and § 1.542-2 shall apply to each individual member of the affiliated group of corporations.
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Treas. Reg. §1.542-4(b)Ineligible affiliated group.
Ineligible affiliated group. (1) Except for certain affiliated railroad corporations, as provided in subparagraph (2) of this paragraph, an affiliated group of corporations is an ineligible affiliated group and therefore may not use its consolidated gross income and consolidated personal holding company income to determine the liability of the group or any member thereof for personal holding company tax (as provided in paragraph (a) of this section), if (i) any member of such group, including the common parent, derived gross income from sources outside the affiliated group for the taxable year in an amount equal to 10 percent or more of its gross income from all sources for that year and (ii) 80 percent or more of the gross income from sources outside the affiliated group consists of personal holding company income as defined in section 543 and §§ 1.543-1 and 1.543-2. For purposes of subdivision (i) of this subparagraph gross income shall not include certain dividend income receivedby a common parent from a corporation not a member of the affiliated group which qualifies under section 542(b)(4) and paragraph (d) of this section. See particularly the examples contained in paragraph (d)(2) of this section. Intercorporate dividends received by members of the affiliated group (including the common parent) are to be included in the gross income from all sources for purposes of the test in subdivision (i) of this subparagraph. For purposes of subdivision (ii) of this subparagraph, section 543 and paragraph (a) of § 1.543-1 shall be applied as if the amount of gross income derived from sources outside the affiliated group by a corporation which is a member of such group is the gross income of such corporation.
(2) An affiliated group of railroad corporations shall not be considered to be an ineligible affiliated group, notwithstanding any other provisions of section 542(b)(2) and this paragraph, if the common parent of such group would be eligible to file a consolidated return under section 141 of the Internal Revenue Code of 1939 prior to its amendment by the Revenue Act of 1942 (56 Stat. 798).
(3) See section 562(d) and § 1.562-3 for dividends paid deduction in the case of a distribution by a member of an ineligible affiliated group.
(4) The determination of whether an affiliated group of corporations is an ineligible group under section 542(b)(2) and this paragraph, may be illustrated by the following examples:
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Treas. Reg. §1.542-4(c)Excluded corporations.
Excluded corporations. The general rule for determining liability of an affiliated group under paragraph (a) of this section shall not apply if any member thereof is a corporation which is excluded, under section 542(c), from the definition of a personal holding company.
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Treas. Reg. §1.542-4(d)Certain dividend income received by a common parent.
Certain dividend income received by a common parent. (1) Dividends received by the common parent of an affiliated group from a corporation which is not a member of the affiliated group shall not be included in gross income or personal holding company income, for the purpose of the test under section 542(b)(2):
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Treas. Reg. §1.542-4(i)§1.542-4(i)
If such common parent owned, directly or indirectly, more than 50 percent of the outstanding voting stock of the dividend paying corporation at the time such common parent became entitled to the dividend, and
(ii) If the dividend paying corporation is not a personal holding company for the taxable year in which the dividends are paid
Thus, if the tests in subdivisions (i) and (ii) of this subparagraph are met, the dividend income received by the common parent from such other corporation will not be considered gross income for purposes of the test in section 542(b)(2)(A) (paragraph (b) of this section), that is, either to determine gross income from sources outside the affiliated group or to determine gross income from all sources.
(2) The application of subparagraph (1) of this paragraph may be illustrated by the following examples:
67 Citing Cases
05-277, sec. 1004(a)(1), 112 Stat. at 2681-888 (1998); Pub. L. No. 106-170, secs. 532(c)(1)(A) and (B), 537(a), 113 Stat. at 1930, 1936 (1999); Pub. L. No. 106-554, secs. 1(a)(7), 165(a)-(e), 114 Stat. at 2763, 2763A-626 (2000); Pub. L. No. 107-16, sec. 542(e)(2)(B), 115 Stat. at 84 (2001); Pub. L. No. 107-147, sec. 417(7), (22), 116 Stat. at 56, 57 (2002); Pub. L. No. 108-81, sec. 503, 117 Stat. at 1003 (2003); Pub. L. No. 108-311, secs. (continued...) -33- disagreement with the construction of
er shareholders ofArebec Corp. (Arebec), a C corpora- tion whose assets consisted chiefly ofappreciated marketable securities. At the time petitioners were shareholders, Arebec was subject to Federal income tax as a "personal holding company" under section 542. This tax classification was disad- vantageous: Section 541 imposes, in addition to applicable income taxes, "a per- sonal holding company tax equal to 20 percent" ofundistributed personal holding company mcome. Petitioners desired to liqu
er shareholders ofArebec Corp. (Arebec), a C corpora- tion whose assets consisted chiefly ofappreciated marketable securities. At the time petitioners were shareholders, Arebec was subject to Federal income tax as a "personal holding company" under section 542. This tax classification was disad- vantageous: Section 541 imposes, in addition to applicable income taxes, "a per- sonal holding company tax equal to 20 percent" ofundistributed personal holding company mcome. Petitioners desired to liqu
er shareholders ofArebec Corp. (Arebec), a C corpora- tion whose assets consisted chiefly ofappreciated marketable securities. At the time petitioners were shareholders, Arebec was subject to Federal income tax as a "personal holding company" under section 542. This tax classification was disad- vantageous: Section 541 imposes, in addition to applicable income taxes, "a per- sonal holding company tax equal to 20 percent" ofundistributed personal holding company mcome. Petitioners desired to liqu
hat authorize the use, distribution, possession, or - 17 - cultivation ofmedical marijuana." Consolidated Appropriations Act, 2017, Pub. L. No. 115-31, sec. 537, 131 Stat. at 228; see also Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, sec. 542, 129 Stat. at 2332-33 (2015); Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. No. 113- 235, sec. 538, 128 Stat. at 2217 (2014). When interpreting such a rider, the Ninth Circuit said that DOJ prosecutions ofindividuals w
er shareholders ofArebec Corp. (Arebec), a C corpora- tion whose assets consisted chiefly ofappreciated marketable securities. At the time petitioners were shareholders, Arebec was subject to Federal income tax as a "personal holding company" under section 542. This tax classification was disad- vantageous: Section 541 imposes, in addition to applicable income taxes, "a per- sonal holding company tax equal to 20 percent" ofundistributed personal holding company mcome. Petitioners desired to liqu
er shareholders ofArebec Corp. (Arebec), a C corpora- tion whose assets consisted chiefly ofappreciated marketable securities. At the time petitioners were shareholders, Arebec was subject to Federal income tax as a "personal holding company" under section 542. This tax classification was disad- vantageous: Section 541 imposes, in addition to applicable income taxes, "a per- sonal holding company tax equal to 20 percent" ofundistributed personal holding company mcome. Petitioners desired to liqu
er shareholders ofArebec Corp. (Arebec), a C corpora- tion whose assets consisted chiefly ofappreciated marketable securities. At the time petitioners were shareholders, Arebec was subject to Federal income tax as a "personal holding company" under section 542. This tax classification was disad- vantageous: Section 541 imposes, in addition to applicable income taxes, "a per- sonal holding company tax equal to 20 percent" ofundistributed personal holding company mcome. Petitioners desired to liqu
er shareholders ofArebec Corp. (Arebec), a C corpora- tion whose assets consisted chiefly ofappreciated marketable securities. At the time petitioners were shareholders, Arebec was subject to Federal income tax as a "personal holding company" under section 542. This tax classification was disad- vantageous: Section 541 imposes, in addition to applicable income taxes, "a per- sonal holding company tax equal to 20 percent" ofundistributed personal holding company mcome. Petitioners desired to liqu
er shareholders ofArebec Corp. (Arebec), a C corpora- tion whose assets consisted chiefly ofappreciated marketable securities. At the time petitioners were shareholders, Arebec was subject to Federal income tax as a "personal holding company" under section 542. This tax classification was disad- vantageous: Section 541 imposes, in addition to applicable income taxes, "a per- sonal holding company tax equal to 20 percent" ofundistributed personal holding company mcome. Petitioners desired to liqu
er shareholders ofArebec Corp. (Arebec), a C corpora- tion whose assets consisted chiefly ofappreciated marketable securities. At the time petitioners were shareholders, Arebec was subject to Federal income tax as a "personal holding company" under section 542. This tax classification was disad- vantageous: Section 541 imposes, in addition to applicable income taxes, "a per- sonal holding company tax equal to 20 percent" ofundistributed personal holding company mcome. Petitioners desired to liqu
hat authorize the use, distribution, possession, or - 17 - cultivation ofmedical marijuana." Consolidated Appropriations Act, 2017, Pub. L. No. 115-31, sec. 537, 131 Stat. at 228; see also Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, sec. 542, 129 Stat. at 2332-33 (2015); Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. No. 113- 235, sec. 538, 128 Stat. at 2217 (2014). When interpreting such a rider, the Ninth Circuit said that DOJ prosecutions ofindividuals w
hat authorize the use, distribution, possession, or - 17 - cultivation ofmedical marijuana." Consolidated Appropriations Act, 2017, Pub. L. No. 115-31, sec. 537, 131 Stat. at 228; see also Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, sec. 542, 129 Stat. at 2332-33 (2015); Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. No. 113- 235, sec. 538, 128 Stat. at 2217 (2014). When interpreting such a rider, the Ninth Circuit said that DOJ prosecutions ofindividuals w
KPMG agreed in 2001 to help find a buyer for a flat fee of 6 Under section 542, a corporation is a personal holding company ifit meets certain income and stock ownership requirements.
However, in the case ofa corporation other than an S corporation or a personal holding company (as defined in section 542), there is a substantial understatement ofincome tax for any taxable year ifthe amount ofthe - 55 - understatement for the taxable year exceeds the greater of 10% ofthe tax required to be shown on the return for the taxable year, or $10,000.
The adjustments treated KSCI as a personal holding company under section 542, and the proposed tax deficiencies for KSCI were computed as if KSCI were a C corporation.
’s services as a music editor. Each of the contracts was memorialized, in part, by a “loan-out agreement” or a “deal memorandum”. Each contract made specific reference to the services of K. R determined P was a personal holding company as defined in sec. 542 I.R.C. for its 1996 and 1997 taxable years. R also determined that P was liable for accuracy related penalties under sec. 6662(a) I.R.C.. Held: P was a personal holding company for its taxable years of 1996 and 1997. Held, further: P in good
Kelvey told the agent that petitioner's operating expenses related to the rental properties. In the subject notice of deficiency, respondent determined that during each of the years in issue, petitioner was a personal holding company, as defined by section 542. The notice of deficiency states as follows: Since over 50 [sic] percent of your adjusted ordinary gross income reported for the taxable years 1989, 1990, 1991, 1992, 1993, and 1994 was from dividends, rents and interest, you qualified as
1.6661-3(b)(1), 5(...continued) (B) Special rule for corporations.--In the case of a corporation other than an S corporation or a personal holding company (as defined in section 542), paragraph (1) shall be applied by substituting "$10,000" for "$5,000".