However, those businesses classified as personal service corporations
will have a tax decrease from 35 percent to the new flat tax of 21 percent, which will be apparent on their financial statements.
The graduated tax rate for corporations (with a top rate of 35 percent) has been replaced by a flat rate of 21 percent (including personal service corporations
In that case, two hockey players formed personal service corporations
, which signed contracts with the teams they played for, and, in turn, the corporations paid the players' salaries and contributed to pension plans for them.
* The passive activity rules apply to individuals, estates, trusts (other than grantor trusts), personal service corporations
, and closely held corporations as well as to the owners of grantor trusts, partnerships, and S corporations.
Treasury Department, worry about the possibility that health insurers could try to avoid having to comply with the deduction limit by "encouraging employees and independent contractors who are natural persons to form small or single-member personal service corporations
or other similar entities to provide services that are historically provided by natural persons," officials said.
The IRS recently released guidance warning that trusts, estates, and personal service corporations
engaged in the real property business cannot meet the qualifying tests of IRC Section 469(c)(7)(B), because that test applies only to individuals capable of performing personal services.
(3du) A professional corporation may also be subject to the special rules applicable to "personal service corporations
," see Q 7561.
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."
(REMICs), starting with 1987; and Personal Service Corporations
This figure is reduced to $150,000 for personal service corporations
, whose principal business consists of the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting.
S Corporations and Personal Service Corporations
(PSCs) must generally use a calendar year or a 52-53-week tax year ending with reference to the calendar year or must establish a business purpose for a different tax year.
(9) Despite this artful drafting, personal service corporations
may be vulnerable to IRS attack under [section] 482 (e.g., if the salary received by the shareholder-employee from the CFC is not reasonable) and, possibly, under [section] 269A.