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associated account number and short narrative to distinguish the
type of service rendered and billed. The accounts range from
5001 to 5010. Accounts 5001 through 5006 and 5008 through 5010
relate to geotechnical services, including field and laboratory
technician services and field soil boring services. Only
accounts 5006 and 5007 relate to engineering services, including
both office and field engineering services.
During the taxable years ended June 30, 1995, and June 30,
1996, petitioner used the graduated tax rates under section
11(b)(1) to determine its corporate tax liability. In a notice
of deficiency respondent determined that petitioner was a
qualified personal service corporation under section 448(d)(2),
thereby requiring a flat tax rate of 35 percent under section
11(b)(2).
OPINION
Respondent contends that engineering and geotechnical
testing are both services within the field of engineering, and
therefore petitioner is a qualified personal service corporation
as defined in section 448(d)(2).
Petitioner contends that it is not a qualified personal
service corporation because geotechnical testing is not in the
field of engineering. Furthermore, petitioner argues that it did
not perform “substantially all” of its services within the field
of engineering as defined under section 448(d)(2).
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