Char-Lil Corporation - Page 17

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             company income" generally to include dividends; interest;                
             royalties; rents; mineral, oil, and gas royalties;                       
             copyright royalties; produced film rents; amounts received               
             as compensation for the use of corporate property by                     
             certain large shareholders; amounts received under a                     
             contract to furnish personal services; and certain amounts               
             relating to estates and trusts.  The provision dealing with              
             rents, section 543(a)(2), provides that the term "personal               
             holding company income" means the portion of the adjusted                
             gross income which consists of:                                          

                       (2) Rents.--The adjusted income from rents;                    
                  except that such adjusted income shall not be included              
                            (A) such adjusted income constitutes 50                   
                       percent or more of the adjusted ordinary gross                 
                       income, and                                                    
                            (B) the sum of--                                          
                                 (i) the dividends paid during the                    
                            taxable year (determined under section 562),              
                                 (ii) the dividends considered as paid                
                            on the last day of the taxable year under                 
                            section 563(c)[(d)] (as limited by the                    
                            second sentence of section 563(b)), and                   
                                 (iii) the consent dividends for the                  
                            taxable year (determined under section 565),              
                  equals or exceeds the amount, if any, by which the                  
                  personal holding company income for the taxable year                
                  (computed without regard to this paragraph and                      
                  paragraph (6), and computed by including as personal                
                  holding company income copyright royalties and the                  
                  adjusted income from mineral, oil, and gas royalties)               
                  exceeds 10 percent of the ordinary gross income.                    

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Last modified: May 25, 2011