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determined a corrected tax liability of $13,135 and a deficiency
of $7,506 in petitioner’s 2002 Federal corporate income tax.
In response to the notice of deficiency, petitioner timely
filed a petition with this Court.
OPINION
I. Applicable Code Sections and Regulations
Section 11(a) imposes a tax on the taxable income of every
corporation. Section 11(b)(1) provides graduated tax rates
generally applicable to corporations. However, section 11(b)(2)
provides: “Notwithstanding paragraph (1), the amount of the tax
imposed by subsection (a) on the taxable income of a qualified
personal service corporation (as defined in section 448(d)(2))
shall be equal to 35 percent of the taxable income.”
A corporation is a qualified personal service corporation if
it meets both the “function test” and the “ownership test” of
section 448(d)(2). See sec. 1.448-1T(e)(3), Temporary Income Tax
Regs., 52 Fed. Reg. 22768 (June 16, 1987). Under the function
test, “substantially all of the activities [of the corporation
must] * * * involve the performance of services in the fields of
health, law, engineering, architecture, accounting, actuarial
science, performing arts, or consulting”. Sec. 448(d)(2)(A)
(emphasis added). Section 1.448-1T(e)(4)(i), Temporary Income
Tax Regs., supra, further describes the function test:
A corporation meets the function test if substantially
all the corporation’s activities for a taxable year
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