| The PHC tax is a 20% penalty tax imposed on the undistributed income of a corporation that meets the following two tests. Stock ownership test More than 50% by value is owned by 5 or fewer shareholders at any time during the last half of the year. Nature of income test 60% or more of adjusted ordinary gross income is personal holding company income (e.g., taxable interest, dividends, royalties, net rental income, personal service income by a 25% owner) |
| A personal holding company tax is assessed on the undistributed personal holding company income (PHCI) of many C corporations. This tax is self-assessed when more than 50% of the value of the corporation’s shares are owned by five or fewer shareholders at any time during the last half of the fiscal year, and 60% or more of AGI is PHCI. PHCI includes taxable interest and dividends received from an unrelated domestic corporation, royalties, net rental income but not tax-exempt interest |
| PHCI includes personal service income by a 25% owner. Eg. Amounts received by corporations under personal service contracts involving a 25%-or-more shareholder are personal holding company income if the contract designates specifically that only the shareholder will provide the services |
| Rents are excluded if they constitute more than 50% of the corporation’s adjusted ordinary gross income and if PHCI other than rents (reduced by dividend distributions) is not in excess of 10% of ordinary gross income. For this purpose, rents are rental income minus depreciation, property taxes, and allocable interest. |
PERSONAL HOLDING COMPANY (PHC) TAX
Posted in Uncategorized.