Calypso Music Incorporated - Page 7




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                    SEC. 543(a)  General Rule.--                                      
               For purposes of this subtitle, the term “personal                      
               holding company income” means the portion of the                       
               adjusted ordinary gross income which consists of:                      
                  *       *       *       *       *       *       *                   
                    (2) Rents.–The adjusted income from rents;                        
                  *       *       *       *       *       *       *                   
                    (7) Personal service contracts.--                                 
                     (A)  Amounts received under a contract under                     
                     which the corporation is to furnish                              
                     personal services; if some person other                          
                     than the corporation has the right to                            
                     designate (by name or by description) the                        
                     individual who is to perform the services,                       
                     or if the individual who is to perform the                       
                     services is designated (by name or by                            
                     description) in the contract; and                                
                     (B)  amounts received from the sale or other                     
                     disposition of such a contract.                                  
                     This paragraph shall apply with respect to                       
                     amounts received for services under a particular                 
                     contract only if at some time during the taxable                 
                     year 25 percent or more in value of the                          
                     outstanding stock of the corporation is owned,                   
                     directly or indirectly, by or for the individual                 
                     who has performed, is to perform, or may be                      
                     designated (by name or by description) as the                    
                     one to perform, such services.                                   

                At all material times, Daryl Kell owned all of the shares             
           in petitioner.  We therefore find that the stock ownership                 
           requirement of section 542(a)(2) was met for both the 1996 and             
           1997 tax years.                                                            
                Next, we must determine whether the “tainted income”                  
           requirement of section 542(a)(1) has also been met.  At least              





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Last modified: May 25, 2011