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Section 448(d)(2) defines a "qualified personal service
corporation" as any corporation:
(A) substantially all of the activities of which
involve the performance of services in the fields of health,
law, engineering, architecture, accounting, actuarial
science, performing arts, or consulting, and
(B) substantially all of the stock of which (by value)
is held directly (or indirectly through 1 or more
partnerships, S corporations, or qualified personal service
corporations not described in paragraph (2) or (3) of
subsection (a)) by--
(i) employees performing services for such
corporation in connection with the activities involving
a field referred to in subparagraph (A),
(ii) retired employees who had performed such
services for such corporation,
(iii) the estate of any individual described in
clause (i) or (ii), or
(iv) any other person who acquired such stock by
reason of the death of an individual described in
clause (i) or (ii)(but only for the 2-year period
beginning on the date of the death of such individual).
Under section 11(b)(2), the income of a personal service
corporation is taxed at a rate of 35 percent.
To qualify as a personal service corporation, a corporation
must satisfy the function and ownership tests under the
regulations. Sec. 1.448-1T(e)(3), (4) and (5), Temporary Income
Tax Regs., 52 Fed. Reg. 22768 (June 16, 1987), as amended by T.D.
8329, 56 Fed. Reg. 485 (Jan. 7, 1991), T.D. 8514, 58 Fed. Reg.
68299 (Dec. 27, 1993). Since petitioner concedes that all of its
stock is owned by its employee, Mr. Huseth, the ownership test is
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