75TH CONGRESS, 1sT SESSION-CH. 8 1 5-AUGUST 26, 1937 Use of corporation property by sha re- ho lder . Rents . Mineral, oil , or gas royalties . Stock ownership . Co nstr ucti ve o wn- er ship . Stock not owned by individual. "(f) USE OF CORPORATION PROPERTY BY SHAREHOLDER .- Am ou nt s received as compensation (however designated and from whom soev er 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 ofa 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 r ig ht t o us e, p ro pe rt y ; but does not include amounts constituting personal holding company income under subs ecti on (f) . " (h) MINERAL, OIL, OR GAS ROYALTIES .-Mineral, oil, or gas roy- alties, 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 ren- dered by shareholders, constitute 15 per centum or more of the gross income. "SEC. 354. STO CK OWN ERSHIP . "(a) CONSTRUCTIVE OWNERSHIP .-For the purpose of determining whether a corporation is a personal holding company, insofar as such determination is based on s tock own ersh ip u nder sec tion 352 (a) (2 ), section 353 ( e) , or section 353 (f)- "( 1) STOCK N OT OWNED B Y IN DIVI DUAL .-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 .
Family and part - (2) FAMILY AND PARTNERSHIP OWNERSHIP .-An individual nershipownershipp shall be considered as owning the stock owned, directly or indi- rectly, 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 o tion to acquire stock options . such stock shall be considered as owned b y such person . For the purposes of this paragraph an option to acquire such an option, and each one of a series of such options, shall be con- sidered as an option to acquire such stock .
Application of " (4) APPLICATION OF FAMILY-PARTNERSHIP AND OPTION RULES .- family-partnership Paragraphs (2) and (3) shall be applied-
and option rules . "(A) For the pur pose s of the sto ck o wner ship req uire - m ent prov ided in sect ion 352 (a) (2 ), if, but only if, the effect is to make the corporation a personal holding com- pany ; "(B) For the pur pose s of sec tion 353 (e) (relating to personal service contracts), or of section 353 (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 . Constructive own- "(5) CONSTRUCTIVE OWNERSHIP AS ACTUAL OWNERSHIP .-Stock ership as actual own- constructively owned by a person by reason of the application ership . of paragraph (1) or (3) shall, for the purpose of applying paragraph (1) or (2), be treated as actually owned by such person ; but stock constructively owned by an individual by reason of the application of paragraph (2) shall not be treated as owned by him for the purpose of aga in a pply ing such par a- graph in order to make another the constructive owner of such stock . 815
