Personal Holding Company Law and Legal Definition

Pursuant to 26 USCS § 542 (a) [Title 26. Internal Revenue Code; Subtitle A. Income Taxes; Chapter 1. Normal Taxes and Surtaxes; Subchapter G. Corporations used to avoid Income Tax on Shareholders; Part II. Personal Holding Companies], the term personal holding company means “any corporation (other than a corporation described in subsection (c)) if-- (1) Adjusted ordinary gross income requirement. At least 60 percent of its adjusted ordinary gross income (as defined in section 543(b)(2) [26 USCS § 543(b)(2)]) for the taxable year is personal holding company income (as defined in section 543(a) [26 USCS § 543(a)]), and (2) Stock ownership requirement. At any time during the last half of the taxable year more than 50 percent in value of its outstanding stock is owned, directly or indirectly, by or for not more than 5 individuals. For purposes of this paragraph, an organization described in section 401(a), 501(c)(17), or 509(a) [26 USCS § 401(a), 501(c)(17), or 509(a)] or a portion of a trust permanently set aside or to be used exclusively for the purposes described in section 642(c) [26 USCS § 642(c)] or a corresponding provision of a prior income tax law shall be considered an individual.”