818 Titl e II -For eign personal holding com- pani es . Inclusion of income of, in income of United Stat es s hare hold ers . 49 Stat . 1731 . Foreign personal hold ing comp anie s . Definition of term . Gros s inc ome re- quir emen t . Post, p. 820. Post, p. 821 . Stock ownership re- quirement . Exceptions . I ncom e. Term defined . Dividends, interest, etc . Stock and securities transactions . Commodities trans- actions . Estates and trusts . Personal service con- tracts . 75TH CONGRESS, 1ST SESSION-CH . 8 15-AUGUST 26, 1937 TITLE II-FOREIGN PERSONAL HOLDING COMPANIES SEC. 201 . INCLUSION IN INCOME OF UNITED STATES SHAREHOLDERS OF INCOME OF FO RE IGN PERSONAL HO LDI NG COMPANIES . The Revenue Act of 1936 is amended by adding after Supplement 0 of Title I a new Supplement to read as follows "Supplement P-Foreign Personal Holding Companies "SEC. 331 . DEFINITION OF FOREIGN PERSONAL HOLDING COMPANY . "(a) & ixitt , RULE .-For the purposes of this title and of Title IA the term foreign personal holding company' means any foreign corporation if- " (1) GROSS INCOME REQUIREMENT .-At least 60 per centum of its gross income (as defined in section 334 (a )) for the taxa ble year is foreign personal holding company income as defined in section 332 ; but if the corporation is a foreign personal holding company with respect to any taxable year, then, for each subse- qu ent t axab le year, the mi nimu m pe rcen tage sha ll be 50 per centum in lieu of 60 per centum, until a taxable year during the wh ole of w hich the sto ck o wner ship req uire d by paragraph (2) does not exist, or until the expiration of three consecutive tax- able 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 in come the amo unt includible therein as a divi dend by reas on of the application of section 334 (c) (2)
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"(2) STOCK OWNERSHIP REQUIREMENT.-At any time during the taxable year more than 50 per centum in value of its out- standing stock is owned, directly or indirectly, by or for not more than five individuals who are citizens or residents of the Uni ted Stat es, here inaf ter call ed United States group' . $ (b) EXCEPTIONS .-The term foreign personal holding company' does not inc lude a corporation exempt from taxation under section 101 . "SEC. 332. FOREI GN PERSONAL H OLDING COMPANY INCOME . "For the purposes of this title the term foreign personal holdin com pa ny income' means the portion, of the gross income determine for the purposes of section 331 (a) (1), which consists of : a Divi dends , in tere st, roya ltie s, a nnui ties . " b STOCK AND SECURrrIES TRANSACTIONS .-Except in the case of regular dealers in stock or securities, gains from the sale or exchange of stock or securities . "(C) COMMODrr1ES 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 appl y 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) PER SONA L SE RVIC E CONTRACTS .-(I) 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 d escr ipti on) the individual who is to per form 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) amou nts
