(1)substantially all of the services of a personal service corporation are performed for (or on behalf of) 1 other corporation, partnership, or other entity, and
(2)the principal purpose for forming, or availing of, such personal service corporation is the avoidance or evasion of Federal income tax by reducing the income of, or securing the benefit of any expense, deduction, credit, exclusion, or other allowance for, any employee-owner which would not otherwise be available,
then the Secretary may allocate all income, deductions, credits, exclusions, and other allowances between such personal service corporation and its employee-owners, if such allocation is necessary to prevent avoidance or evasion of Federal income tax or clearly to reflect the income of the personal service corporation or any of its employee-owners.
For purposes of this section—
(1) Personal service corporation
The term “personal service corporation” means a corporation the principal activity of which is the performance of personal services and such services are substantially performed by employee-owners.
The term “employee-owner” means any employee who owns, on any day during the taxable year, more than 10 percent of the outstanding stock of the personal service corporation. For purposes of the preceding sentence, section
318 shall apply, except that “5 percent” shall be substituted for “50 percent” in section
(3) Related persons
All related persons (within the meaning of section
144(a)(3)) shall be treated as 1 entity.
Amendment by Pub. L. 99–514applicable to bonds issued after Aug. 15, 1986, except as otherwise provided, see sections 1311 to 1318 ofPub. L. 99–514, set out as an Effective Date; Transitional Rules note under section
141 of this title.
Section 250(c) ofPub. L. 97–248provided that: “The amendments made by this section [enacting this section] shall apply to taxable years beginning after December 31, 1982.”
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013
An empty table indicates that we see no relevant changes listed in the classification tables. If you suspect that our system may be missing something, please double-check with the Office of the Law Revision Counsel.
Description of Change
Statutes at Large
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