Calypso Music Incorporated - Page 10




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                The income received for editing services for Fair Game and            
           Moll Flanders, personal holding company income, constitutes 74             
           percent of petitioner’s adjusted ordinary gross income in the              
           1996 taxable year.  The income received for editing services               
           for Kazaam, The Associate, Breakdown, and Moll Flanders,                   
           personal holding company income, amounts to 76 percent of                  
           petitioner’s adjusted ordinary gross income for 1997.                      
                For the 1996 and 1997 tax years, petitioner’s ledgers                 
           indicate it received rental income in the amounts of $24,400               
           and $68,100 respectively.  Respondent determined that these                
           amounts constitute personal holding company income as defined              
           in section 542(a)(2).  Respondent’s determination is entitled              
           to a presumption of correctness; petitioner bears the burden of            
           proof to establish the determination is in error.  See Rule                
           142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).                      
           Petitioner advances no meaningful argument on brief that                   
           respondent’s determination is erroneous.  We therefore find                
           that the rental income in the years in issue is personal                   
           holding company income.                                                    
                We hold that petitioner is a personal holding company, as             
           defined in section 542, for the 1996 and 1997 taxable years.               
           As a consequence, petitioner is liable for personal holding                
           company tax, imposed by section 541, equal to 39.6 percent of              
           the undistributed personal holding company income for each of              






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