§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 ; Apr. 22, 1960, Pub. L. 86–435, §1(e), 74 Stat. 78 ; Feb. 26, 1964, Pub. L. 88–272, title II, §225(e), 78 Stat. 85 ; Oct. 4, 1976, Pub. L. 94–455, title XIX, §1901(b)(32)(F), 90 Stat. 1800 ; Oct. 22, 1986, Pub. L. 99–514, title VI, §645(a)(3), 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.