§545 — Undistributed personal holding company income
30 cases·2 followed·1 criticized·1 overruled·26 cited—7% support
Statute Text — 26 U.S.C. §545
For purposes of this part, the term “undistributed personal holding company income” means the taxable income of a personal holding company adjusted in the manner provided in subsections (b), (c), and (d), minus the dividends paid deduction as defined in section 561. In the case of a personal holding company which is a foreign corporation, not more than 10 percent in value of the outstanding stock of which is owned (within the meaning of section 958(a)) during the last half of the taxable year by United States persons, the term “undistributed personal holding company income” means the amount determined by multiplying the undistributed personal holding company income (determined without regard to this sentence) by the percentage in value of its outstanding stock which is the greatest percentage in value of its outstanding stock so owned by United States persons on any one day during such period.
For the purposes of subsection (a), the taxable income shall be adjusted as follows:
There shall be allowed as a deduction Federal income and excess profits taxes and income, war profits and excess profits taxes of foreign countries and possessions of the United States (to the extent not allowable as a deduction under section 275(a)(4)), accrued during the taxable year or deemed to be paid by a domestic corporation under section 960 for the taxable year, but not including the accumulated earnings tax imposed by section 531 or the personal holding company tax imposed by section 541.
The deduction for charitable contributions provided under section 170 shall be allowed, but in computing such deduction the limitations in section 170(b)(1)(A), (B), (D), and (E) shall apply, and section 170(b)(2) and (d)(1) shall not apply. For purposes of this paragraph, the term “contribution base” when used in section 170(b)(1) means the taxable income computed with the adjustments (other than the 10-percent limitation) provided in section 170(b)(2) and (d)(1) and without deduction of the amount disallowed under paragraph (6) of this subsection.
The special deductions for corporations provided in part VIII (except section 248) of subchapter B (section 241 and following, relating to the deduction for dividends received by corporations, etc.) shall not be allowed.
The net operating loss deduction provided in section 172 shall not be allowed, but there shall be allowed as a deduction the amount of the net operating loss (as defined in section 172(c)) for the preceding taxable year computed without the deductions provided in part VIII (except section 248) of subchapter B.
There shall be allowed as a deduction the net capital gain for the taxable year, minus the taxes imposed by this subtitle attributable to such net capital gain. The taxes attributable to such net capital gain shall be an amount equal to the difference between—
the taxes imposed by this subtitle (except the tax imposed by this part) for such year, and
such taxes computed for such year without including such excess in taxable income.
The aggregate of the deductions allowed under section 162 (relating to trade or business expenses) and section 167 (relating to depreciation), which are allocable to the operation and maintenance of property owned or operated by the corporation, shall be allowed only in an amount equal to the rent or other compensation received for the use of, or the right to use, the property, unless it is established (under regulations prescribed by the Secretary) to the satisfaction of the Secretary—
that the rent or other compensation received was the highest obtainable, or, if none was received, that none was obtainable;
that the property was held in the course of a business carried on bona fide for profit; and
either that there was reasonable expectation that the operation of the property would result in a profit, or that the property was necessary to the conduct of the business.
In the case of a foreign corporation, paragraph (5) shall be applied by taking into account only gains and losses which are effectively connected with the conduct of a trade or business within the United States and are not exempt from tax under treaty.
In the case of a foreign corporation all of the outstanding stock of which during the last half of the taxable year is owned by nonresident alien individuals (whether directly or indirectly through foreign estates, foreign trusts, foreign partnerships, or other foreign corporations), the taxable income for purposes of subsection (a) shall be the income which constitutes personal holding company income under section 543(a)(7), reduced by the deductions attributable to such income, and adjusted, with respect to such income, in the manner provided in subsection (b).
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.545-1 Definition
- Treas. Reg. §Treas. Reg. §1.545-1(a) Undistributed personal holding company income is the amount which is subject to the personal holding company tax imposed under section 541.
- Treas. Reg. §Treas. Reg. §1.545-1(b) For purposes of the imposition of the personal holding company tax on a foreign corporation, resident or nonresident, which files or causes to be filed a return, the undistributed personal holding company income shall be computed on the basis of the taxable income from sources within the United States, and such income shall be adjusted in accordance with the principles of section 545(b) and § 1.
- Treas. Reg. §Treas. Reg. §1.545-2 Adjustments to taxable income
- Treas. Reg. §Treas. Reg. §1.545-2(a) Taxes—(1) General rule.
- Treas. Reg. §Treas. Reg. §1.545-2(b) Charitable contributions—(1) Taxable years beginning before January 1, 1970.
- Treas. Reg. §Treas. Reg. §1.545-2(c) Special deductions disallowed.
- Treas. Reg. §Treas. Reg. §1.545-2(d) Net operating loss.
- Treas. Reg. §Treas. Reg. §1.545-2(e) Long-term capital gains.
- Treas. Reg. §Treas. Reg. §1.545-2(f) Bank affiliates.
- Treas. Reg. §Treas. Reg. §1.545-2(g) Payment of indebtedness incurred prior to January 1, 1934—(1) General rule.
- Treas. Reg. §Treas. Reg. §1.545-2(h) Expenses and depreciation applicable to property of the taxpayer.
- Treas. Reg. §Treas. Reg. §1.545-2(i) Amount of a lien in favor of the United States.
- Treas. Reg. §Treas. Reg. §1.545-2(v) §1.545-2(v)
- Treas. Reg. §Treas. Reg. §1.545-2(x) §1.545-2(x)
- Treas. Reg. §Treas. Reg. §1.545-3 Special adjustment to taxable income
- Treas. Reg. §Treas. Reg. §1.545-3(a) §1.545-3(a)
- Treas. Reg. §Treas. Reg. §1.545-3(b) Any reduction, by reason of section 545(c)(5)(B) and this subdivision (ii), of the deductions otherwise allowed by section 545(c)(1) for such preceding years.
- Treas. Reg. §Treas. Reg. §1.545-3(c) §1.545-3(c)
- Treas. Reg. §Treas. Reg. §1.545-3(d) A statement that such person or persons do not own more than 10 percent in value of the taxpayer's outstanding stock.
- Treas. Reg. §Treas. Reg. §1.545-3(e) Election not to deduct—(1) In general.
- Treas. Reg. §Treas. Reg. §1.545-3(f) Limitation on deduction—(1) In general.
- Treas. Reg. §Treas. Reg. §1.545-3(g) Burden of proof.
- Treas. Reg. §Treas. Reg. §1.545-3(h) Application of section 381(c)(15).
- Treas. Reg. §Treas. Reg. §1.545-3(i) §1.545-3(i)
30 Citing Cases
Finally, petitioners contended that some ofthe tax liabilities in question had been discharged in bankruptcy. A chapter 7 discharge relieves a debtor from all personal liabilities (incurred before the filing ofthe bankruptcy petition) except those listed in section 523 ofthe Bankruptcy Code. See 11 U.S.C. sec. 727(b) (2012); Bussell,
The additional tax is imposed by section 541, which provides: In addition to other taxes imposed by this chapter, there is hereby imposed for each taxable year on the undistributed personal holding company income (as defined in section 545) of every personal holding company (as defined in section 542) a personal holding company tax equal to 39.6 percent of the undistributed personal holding company income.