
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC269A]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
                      PART IX--ITEMS NOT DEDUCTIBLE
 
Sec. 269A. Personal service corporations formed or availed of to 
        avoid or evade income tax
        

(a) General rule

    If--
        (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.

(b) Definitions

    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.

                         (2) Employee-owner

        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 
    318(a)(2)(C).

                         (3) Related persons

        All related persons (within the meaning of section 144(a)(3)) 
    shall be treated as 1 entity.

(Added Pub. L. 97-248, title II, Sec. 250(a), Sept. 3, 1982, 96 Stat. 
528; amended Pub. L. 99-514, title XIII, Sec. 1301(j)(4), Oct. 22, 1986, 
100 Stat. 2657.)


                               Amendments

    1986--Subsec. (b)(3). Pub. L. 99-514 substituted ``section 
144(a)(3)'' for ``section 103(b)(6)(C)''.


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-514 applicable to bonds issued after Aug. 
15, 1986, except as otherwise provided, see sections 1311 to 1318 of 
Pub. L. 99-514, set out as an Effective Date; Transitional Rules note 
under section 141 of this title.


                             Effective Date

    Section 250(c) of Pub. L. 97-248 provided that: ``The amendments 
made by this section [enacting this section] shall apply to taxable 
years beginning after December 31, 1982.''

                  Section Referred to in Other Sections

    This section is referred to in sections 263A, 267, 280H, 441, 465, 
469, 775 of this title.
