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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