Page:United States Statutes at Large Volume 53 Part 1.djvu/118

 CODIFICATION OF INTERNAL REVENUE LAWS 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. (f) USE OF CORPORATION PROPERTY BY SHAREHOLDER.-Amounts re- ceived 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 per centum 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 cor- poration or by means of a sublease or other arrangement. (g) RENTS.- Rents, unless constituting 50 per centum or more of the gross income. For the purposes of this subsection the term "rents" means compensation, however designated, for the use of, or right to use, property, and the interest on debts owed to the corporation, to the extent such debts represent the price for which real property held primarily for sale to customers in the ordinary course of its trade or business was sold or exchanged by the corporation; but does not include amounts constituting personal holding company income under subsection (f). (h) MINERAL, OIL, OR GAS ROYALTIES.- Mineral, oil, or gas royal- ties, unless (1) constituting 50 per centum or more of the gross income, and (2) the deductions allowable under section 23 (a) (relat- ing to expenses) other than compensation for personal services rendered by shareholders, constitute 15 per centum or more of the gross income. SEC. 503. STOCK OWNERSHIP. (a) CONSTRUCTIVE OwNERHIP. -For the purpose of determining whether a corporation is a personal holding company, insofar as such determination is based on stock ownership under section 501 (a) (2), section 502 (e), or section 502 (f)- (1) STOCK NOT OWNED BY INDIIDUAL. -Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being owned proportionately by its shareholders, partners, or beneficiaries. (2) FAMILY AND PARTNERSHIP OWNERSHIP. -An individual shall be considered as owning the stock owned, directly or indirectly, by or for his family or by or for his partner. For the purposes of this paragraph the family of an individual includes only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. (3) OPTIoNs. - If any person has an option to acquire stock such stock shall be considered as owned by such person. For the pur- poses of this paragraph an option to acquire such an option, and each one of a series of such options, shall be considered as an option to acquire such stock. (4) APPLICATION OF FAMILY-PARTNERSHIP AND OPTION RULES. - Paragraphs (2) and (3) shall be applied- (A) For the purposes of the stock ownership requirement pro- vided in section 501 (a) (2), if, but only if, the effect is to make the corporation a personal holding company; (B) For the purposes of section 502 (e) (relating to personal service contracts), or of section 502 (f) (relating to the use of property by shareholders), if, but only if, the effect is to make the amounts therein referred to includible under such subsection as personal holding company income. (5) CONSTRUCTIVE OWNERSHIP AS ACTUAL OWNERSHIP.-Stock con- structively owned by a person by reason of the application of para- graph (1) or (3) shall, for the purpose of applying paragraph (1) or (2), be treated as actually owned by such person; but stock con- 106

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