PUBLIC IAWS-CH. 289-MAY 28, 1938 Dividends. Post, p. 68. Stock ownership re- quirement. Exceptions. Ante, p. 480. Income. Term defined. Dividends, etc. Stock and securi- ties tranactions. Commodities trans- actions. Estates and trusts. Ante, p. 617. Personal service contracts. Use of corporation property by share- older. company with respect to any taxable year ending after August 26, 1937, then, for each subsequent taxable year, the minimum percentage shall be 50 per centum in lieu of 60 per centum, until a taxable year during the whole of which the stock owner- ship required by paragraph (2) does not exist, or until the expiration of three consecutive taxable years in each of which less than 50 per centum of the gross income is foreign personal holding company income. For the purposes of this paragraph there shall be included in the gross income the amount includible therein as a dividend by reason of the application of section 334 (c) (2); and (2) STOCK OWNERSHIP REQUIREMENT.- At any time during the taxable year more than 50 per centum in value of its outstanding stock is owned, directly or indirectly, by or for not more than five individuals who are citizens or residents of the United States, hereinafter called "United States group". (b) ExcEPTIONs. -T he term "foreign personal holding company" does not include a corporation exempt from taxation under section 101. SEC. 332. FOREIGN PERSONAL HOLDING COMPANY INCOME. For the purposes of this title the term "foreign personal holdin company income" means the portion, of the gross income determined for the purposes of section 331 (a) (1), which consists of: (a) Dividends, interest, royalties, annuities. (b) STOCK AND SECURmTIE TRANSAcnIONs.- Except in the case of regular dealers in stock or securities, gains from the sale or exchange of stock or securities. (c) COMMODITIES TRANSACTIONS. -Gains from futures transactions in any commodity on or subject to the rules of a board of trade or commodity exchange. This subsection 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. (d) ESTATES AND TRuSTS.- Amounts includible in computing the net income of the corporation under Supplement E; and gains from the sale or other disposition of any interest in an estate or trust. (e) PERSONAL SERVICE CoNTAcTs.- (1) 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 desig- nated (by name or by description) in the contract; and (2) amounts received from the sale or other disposition of such a contract. This subsection shall apply with respect to amounts received for services under a particular contract only if at some 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 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 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 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 corpo- ration or by means of a sublease or other arrangement. 546 [52 STAT.
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