- 3 - During 2002, petitioner was owned 100 percent by architects licensed to practice in the State of California. Petitioner timely filed a Form 1120, U.S. Corporation Income Tax Return, for 2002, identifying its business activity as architecture. Petitioner reported gross receipts of $2,728,291, cost of goods sold of $850,006, total income of $1,857,382, total deductions of $1,819,853, taxable income of $37,529, and total tax of $5,629. To calculate the total tax, petitioner used the graduated tax rates generally applicable to corporations, as provided in section 11(b)(1). On November 18, 2004, respondent issued petitioner a notice of deficiency stating: It is determined that for the taxable year shown below [2002], CALPO HOM & DONG ARCHITECTS INC is a Personal Service Corporation that is subject to a special flat income tax rate of 35%. The corporation is a qualified Personal Service Corporation because substantially all of the corporation’s activities involve the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, the performing arts, or consulting, and substantially all of the stock of the corporation is held by employees performing services for the corporation, retired employees, employees’ or retired employees’ estates or persons acquiring stock by reason of an employees’ death. Using the flat 35-percent tax rate applicable to qualified personal service corporations under section 11(b)(2), respondentPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 NextLast modified: November 10, 2007