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section 541 for the years in issue. Section 542(a) defines
personal holding company as follows:
SEC. 542(a). General Rule.--For purposes
of this subtitle, the term "personal holding
company" means any corporation (other than a
corporation described in subsection (c)) if--
(1) Adjusted ordinary gross income
requirement.--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
(2) Stock ownership requirement.--
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.
Petitioner concedes that it meets the stock ownership
requirement of section 542(a)(2) during the last half
of each of the subject taxable years. The issue is
whether petitioner meets the adjusted ordinary gross income
requirement of section 542(a)(1) during each of the subject
years.
For purposes of the adjusted ordinary gross income
requirement, section 543(a) defines "personal holding
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