Personal Service Corporation

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Personal Service Corporation

A corporation in which employee-owners perform services helpful to individuals, such as accounting, health care, or performing arts. In order to qualify as a personal service corporation for tax purposes, the employees must own at least 10% of the fair market value of the company's stock and the company must have been engaged in the principal business of a personal service on the last day of the previous tax year or the last day of the calendar year of the company's tax year.
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B) substantially all of the stock of which (by value) is held directly (or indirectly through 1 or more partnerships, S corporations, or qualified personal service corporations .
A personal service activity is one in any of eight fields also specified as those of personal service corporations subject to a 35% flat corporate income tax rate in section 448(d)(2): health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting, with the addition of "any other trade or business in which capital is not a material income-producing factor.
9) Despite this artful drafting, personal service corporations may be vulnerable to IRS attack under [section] 482 (e.
But personal service corporations, such as accountants, doctors and lawyers, are required to have a calendar year.
However, when an accounting practice or other personal service business is incorporated, numerous tax provisions relating specifically to Personal Service Corporations are triggered.
Personal service corporations, S-corporations and C-corporations with gross receipts of less than $5 million also can use the cash method of accounting.
As was discussed in the October 1989 SURVEY OF CURRENT BUSINESS, lump-sum payments by personal service corporations to their owner-employees (doctors, lawyers, etc.
Section 11(b)(2) imposes a flat 35% tax rate on personal service corporations rather than allowing them to use the progressive rate structure provided for most other corporations.
469 apply to individuals, trusts, estates, personal service corporations, and closely held C corporations.
The rules apply to individuals, trusts, estates and personal service corporations.
Hence, limitations would not apply to employees of a partnership who perform services substantially identical to those performed by corporate executives at a competing firm, nor would they apply to non-executive employees or to employee-owners of personal service corporations.

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