Similarities and Distinctions in Tax Treatment Among Business Entities: Formation

Question 1

A corporation must meet both the stock ownership test and the gross income test to be a personal holding company (PHC). These tests are:

Answer 1

at any time during the last half of the year more than 50% in value of its outstanding stock is owned, directly or indirectly, by five or fewer individuals, and
at least 60% of its adjusted ordinary gross income is PHC income.

Question 2

A sample of some of the personal holding company income includes:

Answer 2

1) dividends, taxable interest, royalties (except copyright or software royalties), and annuities.
2) rents, unless they constitute 50% or more of the adjusted ordinary gross income.
3) mineral, oil, and gas royalties, unless they constitute 50% or more of the adjusted ordinary gross income

Question 3

A personal service corporation

Answer 3

is an entity whose principal activities involve performing personal services in the areas of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting