
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: 26USC553]

 
                     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 III--FOREIGN PERSONAL HOLDING COMPANIES
 
Sec. 553. Foreign personal holding company income


(a) Foreign personal holding company income

    For purposes of this subtitle, the term ``foreign personal holding 
company income'' means that portion of the gross income, determined for 
purposes of section 552, which consists of:

                         (1) Dividends, etc.

        Dividends, interest, royalties, and annuities. This paragraph 
    shall not apply to active business computer software royalties (as 
    defined in section 543(d)).

                (2) Stock and securities transactions

        Except in the case of regular dealers in stock or securities, 
    gains from the sale or exchange of stock or securities.

                    (3) Commodities transactions

        Gains from futures transactions in any commodity on or subject 
    to the rules of a board of trade or commodity exchange. This 
    paragraph shall not apply to gains by a producer, processor, 
    merchant, or handler of the commodity which arise out of bona fide 
    hedging transactions reasonably necessary to the conduct of its 
    business in the manner in which such business is customarily and 
    usually conducted by others.

                       (4) Estates and trusts

        Amounts includible in computing the taxable income of the 
    corporation under part I of subchapter J (sec. 641 and following, 
    relating to estates, trusts, and beneficiaries); and gains from the 
    sale or other disposition of any interest in an estate or trust.

                   (5) Personal service contracts

            (A) Amounts received under a contract under which the 
        corporation is to furnish personal services; if some person 
        other than the corporation has the right to designate (by name 
        or by description) the individual who is to perform the 
        services, or if the individual who is to perform the services is 
        designated (by name or by description) in the contract; and
            (B) amounts received from the sale or other disposition of 
        such a contract.

    This paragraph shall apply with respect to amounts received for 
    services under a particular contract only if at some time during the 
    taxable year 25 percent or more in value of the outstanding stock of 
    the corporation is owned, directly or indirectly, by or for the 
    individual who has performed, is to perform, or may be designated 
    (by name or by description) as the one to perform, such services.

           (6) Use of corporation property by shareholder

        Amounts received as compensation (however designated and from 
    whomsoever received) for the use of, or right to use, property of 
    the corporation in any case where, at any time during the taxable 
    year, 25 percent or more in value of the outstanding stock of the 
    corporation is owned, directly or indirectly, by or for an 
    individual entitled to the use of the property; whether such right 
    is obtained directly from the corporation or by means of a sublease 
    or other arrangement. This paragraph shall apply only to a 
    corporation which has foreign personal holding company income for 
    the taxable year, computed without regard to this paragraph and 
    paragraph (7), in excess of 10 percent of its gross income.

                              (7) Rents

        Rents, unless constituting 50 percent or more of the gross 
    income. For purposes of this paragraph, the term ``rents'' means 
    compensation, however designated, for the use of, or right to use, 
    property, but does not include amounts constituting foreign personal 
    holding company income under paragraph (6).

(b) Limitation on gross income in certain transactions

    For purposes of this part--
        (1) gross income and foreign personal holding company income 
    determined with respect to transactions described in subsection 
    (a)(2) (relating to gains from stock and security transactions) 
    shall include only the excess of gains over losses from such 
    transactions, and
        (2) gross income and foreign personal holding company income 
    determined with respect to transactions described in subsection 
    (a)(3) (relating to gains from commodity transactions) shall include 
    only the excess of gains over losses from such transactions.

(Aug. 16, 1954, ch. 736, 68A Stat. 195; Pub. L. 86-435, Sec. 1(e), Apr. 
22, 1960, 74 Stat. 78; Pub. L. 88-272, title II, Sec. 225(e), Feb. 26, 
1964, 78 Stat. 85; Pub. L. 94-455, title XIX, Sec. 1901(b)(32)(F), Oct. 
4, 1976, 90 Stat. 1800; Pub. L. 99-514, title VI, Sec. 645(a)(3), Oct. 
22, 1986, 100 Stat. 2291.)


                               Amendments

    1986--Subsec. (a)(1). Pub. L. 99-514 inserted at end ``This 
paragraph shall not apply to active business computer software royalties 
(as defined in section 543(d)).''
    1976--Subsec. (a)(1). Pub. L. 94-455 struck out provisions relating 
to dividend distribution of divested stock after ``royalties, and 
annuities''.
    1964--Subsec. (a). Pub. L. 88-272 designated existing provisions as 
subsec. (a), and substituted pars. (1) to (7) for ``personal holding 
company income, as defined in section 543, except that all interest, 
whether or not treated as rent, and all royalties, whether or not 
mineral, oil, or gas royalties or copyright royalties, shall constitute 
`foreign personal holding company income'.''
    Subsec. (b). Pub. L. 88-272 added subsec. (b).
    1960--Pub. L. 86-435 included copyright royalties within foreign 
personal holding company income.


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-514 applicable to royalties received before, 
on, and after Dec. 31, 1986, see section 645(e) of Pub. L. 99-514 set 
out as a note under section 543 of this title.


                    Effective Date of 1976 Amendment

    Amendment by Pub. L. 94-455 applicable with respect to taxable years 
beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, 
set out as a note under section 2 of this title.


                    Effective Date of 1964 Amendment

    Amendment by Pub. L. 88-272 applicable to taxable years beginning 
after Dec. 31, 1963, see section 225(l)(1) of Pub. L. 88-272, set out as 
a note under section 316 of this title.


                    Effective Date of 1960 Amendment

    Amendment by Pub. L. 86-435 applicable only with respect to taxable 
years beginning after Dec. 31, 1959, see section 2 of Pub. L. 86-435, 
set out as a note under section 543 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 552, 554 of this title.
