Calypso Music Incorporated - Page 6




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          corporation.  See Fulman v. United States, 434 U.S. 528, 531                
          (1978).  The additional tax is imposed by section 541, which                
          provides:                                                                   
                    In addition to other taxes imposed by this                        
               chapter, there is hereby imposed for each taxable year                 
               on the undistributed personal holding company income                   
               (as defined in section 545) of every personal holding                  
               company (as defined in section 542) a personal holding                 
               company tax equal to 39.6 percent of the undistributed                 
               personal holding company income.                                       

               A corporation is a personal holding company if two                     
          requirements are satisfied.  See sec. 542(a).  Those two                    
          requirements have been described as the "stock ownership" and               
          "tainted income" tests.  See Kenyatta Corp. v. Commissioner, 86             
          T.C. 171 (1986), affd. 812 F.2d 577 (9th Cir. 1987).  The "stock            
          ownership" test is satisfied if "At any time during the last half           
          of the taxable year more than 50 percent in value of * * * [the             
          corporation's] outstanding stock is owned, directly or                      
          indirectly, by or for not more than 5 individuals."  Sec.                   
          542(a)(2).  The "tainted income" test is satisfied where "At                
          least 60 percent of [the corporation's] 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))".            
          Sec. 542(a)(1).  Section 543(a), which defines personal holding             
          company income, provides in pertinent part:                                 









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