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60 percent of petitioner’s adjusted ordinary gross income4 for
the taxable year must be personal holding company income to
satisfy this requirement. Petitioner’s adjusted ordinary gross
income for 1996 and 1997 tax years was $133,977 and $282,124
respectively.
In pertinent part, section 543(a)(7) provides that
petitioner’s income from the performance of a contract for
music editing services will be personal holding company income
if the individual who is to perform the services is designated
(by name or by description) in the contract and 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.
In the 1996 taxable year $99,182 was received by
petitioner for the editing services of Daryl Kell on the
pictures Fair Game and Moll Flanders. The loan-out agreement
and deal memoranda for these two pictures specifically
4 “Adjusted ordinary gross income” is defined in sec. 543(b)
as gross income minus gains from the sale or other disposition of
capital assets or sec. 1231(b) assets, and minus depreciation,
taxes, interest, and rent incurred in connection with certain
rental income and mineral royalties. In the instant case,
petitioner's adjusted ordinary gross income would equal its gross
income.
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