Calypso Music Incorporated - Page 1

                                 T.C. Memo. 2000-293                                  

                               UNITED STATES TAX COURT                                

                      CALYPSO MUSIC INCORPORATED, Petitioner v.                       
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 12683-99.           Filed September 20, 2000.               
                    P was incorporated by K.  K is a motion picture                   
               music editor and P’s sole shareholder, director, and                   
               officer.  P contracted with motion picture studios for                 
               K’s services as a music editor.  Each of the contracts                 
               was memorialized, in part, by a “loan-out agreement” or                
               a “deal memorandum”.  Each contract made specific                      
               reference to the services of K.                                        
                    R determined P was a personal holding company as                  
               defined in sec. 542 I.R.C. for its 1996 and 1997                       
               taxable years.  R also determined that P was liable for                
               accuracy related penalties under sec. 6662(a) I.R.C..                  
                    Held: P was a personal holding company for its                    
               taxable years of 1996 and 1997.                                        
                    Held, further: P in good faith and reasonably                     
               relied on the return preparers for the position taken                  
               on its returns and is not liable for penalties under                   
               sec. 6662(a) I.R.C. pursuant to sec. 6664(c) I.R.C..                   

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