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another of the professions snagged in the QPSC net:
only if 95 percent or more of the time spent by
employees of the corporation, serving in their capacity
as such, is devoted to the performance of services in a
qualifying field. For purposes of determining whether
this 95 percent test is satisfied, the performance of
any activity incident to the actual performance of
services in a qualifying field is considered the
performance of services in that field. Activities
incident to the performance of services in a qualifying
field include the supervision of employees engaged in
directly providing services to clients, and the
performance of administrative and support services
incident to such activities. * * *
Sec. 1.448-1T(e)(4)(i), Temporary Income Tax Regs, 52 Fed. Reg.
22766 (June 16, 1987) (emphasis added).
Lykins’s decision to split his business thus threatens to
ensnare him: The Code itself lists “accounting” as one of the
qualifying fields, and the regulations carefully distinguish
investment advice sold for a fee from investment advice sold
incident to a brokerage service producing commissions.4 Lykins
Financial, whose income was entirely in the form of commissions
was not, under the regulation, selling services in a qualifying
field. Lykins Inc. was.
The Commissioner argues that when Lykins Inc. hived off its
investment business from its accounting services, it necessarily
left behind only the qualifying field of accounting. He asserts
that if employees generated commission income, they were Lykins
4 Sec. 1.448-1T(3)(4)(iv)(B), Examples (4),(5),(10),
Temporary Income Tax Regs. 22767 (June 16, 1987).
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