What is a personal holding company (PHC) for a corporation?

A personal holding company (PHC) is a corporation that meets the following conditions: (1) it has at least 60% of its adjusted ordinary gross income from passive activities, such as rents, interest, and royalties; (2) it is not a real estate investment trust (REIT); (3) it does not materially participate in the conduct of any trade or business; and (4) it has 50% or more of its outstanding stock owned (directly or indirectly) by five or fewer individuals, such as corporations, partnerships, and estates.

Which types of deductions are allocable to each type of income in figuring adjusted ordinary gross income?

Deductions for depreciation and amortization, property taxes, interest, rent, and production expenses are allocable to rents. Deductions for depreciation and amortization, depletion, property and severance taxes, interest, and rent are allocable to mineral, oil, and gas royalties and gross income from a working interest in an oil or gas well. Deductions for depreciation and amortization, property taxes, interest, and rent are allocable to compensation.

What is a worksheet provided for in Schedule PH?

A worksheet is provided for calculating ordinary gross income, adjusted ordinary gross income, and the percentage of stock held for producing oil or gas for purposes of the Personal Holding Company (PHC) income test.

What is undistributed personal holding company income?

Undistributed personal holding company income is the portion of a corporation's personal holding company income that has not been distributed to its shareholders. For a PHC, this income is subject to the higher tax rate if it is not timely reported on Form 1120-PHC.

What is the tax treatment for a personal holding company (PHC)?

A personal holding company (PHC) pays a higher tax rate on its undistributed personal holding company income. The tax rate is 20% if the corporation timely files Form 1120-PHC, or 35% if it does not. If the PHC has net capital gains and it timely files Form 1120-PHC, it may pay a reduced tax rate of 20% on those gains.

What are passive activities for the purpose of determining if a corporation is a PHC?

For purposes of determining if a corporation is a PHC, passive activities include rents from real property, interest income, and royalties. A corporation's adjusted ordinary gross income must come primarily from these passive activities for it to be considered a PHC.

What types of income are separately adjusted in figuring adjusted ordinary gross income?

Rents, royalties from mineral, oil, and gas wells, compensation, and certain excluded interest income are separately adjusted in figuring adjusted ordinary gross income.

How does a corporation determine if it is a personal holding company (PHC)?

To determine if it is a personal holding company (PHC), a corporation must complete Worksheet 2 in the instructions for Schedule PH. If the percentage of adjusted ordinary gross income from passive activities is at least 60% and the stock ownership requirement of section 542(a) is met, the corporation is classified as a PHC.

What is the purpose of Schedule PH?

Schedule PH is used to determine whether a corporation is a personal holding company (PHC). If a corporation is classified as a PHC, it must file Form 1120-PHC in addition to Form 1120. A PHC pays a higher tax rate on its undistributed personal holding company income.

What is the effect of failing to meet the percentage requirement for a Personal Holding Company?

If a corporation does not meet the 60% or more requirement for the percentage test in determining whether it is a Personal Holding Company, then it is not treated as a Personal Holding Company and Schedule PH need not be filed.

Form 1120 Schedule PH

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U.S. Personal Holding Company (PHC) Tax

Rev. November 2015

This document provides instructions for completing Schedule PH (Form 1120), which is used to report personal holding company income and tax. The schedule requires information about the corporation's stock ownership, income and deductions from property, dividends paid, and excess of expenses over income. It also includes a reminder about the requirement to attach certain schedules and forms.

Instructions

Form 1120 Instructions for Schedule PH - Instructions for Schedule PH (Form 1120), U.S. Personal Holding Company (PHC) Tax

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FAQ

What is a personal holding company (PHC) for a corporation?
A personal holding company (PHC) is a corporation that meets the following conditions: (1) it has at least 60% of its adjusted ordinary gross income from passive activities, such as rents, interest, and royalties; (2) it is not a real estate investment trust (REIT); (3) it does not materially participate in the conduct of any trade or business; and (4) it has 50% or more of its outstanding stock owned (directly or indirectly) by five or fewer individuals, such as corporations, partnerships, and estates.
Which types of deductions are allocable to each type of income in figuring adjusted ordinary gross income?
Deductions for depreciation and amortization, property taxes, interest, rent, and production expenses are allocable to rents. Deductions for depreciation and amortization, depletion, property and severance taxes, interest, and rent are allocable to mineral, oil, and gas royalties and gross income from a working interest in an oil or gas well. Deductions for depreciation and amortization, property taxes, interest, and rent are allocable to compensation.
What is a worksheet provided for in Schedule PH?
A worksheet is provided for calculating ordinary gross income, adjusted ordinary gross income, and the percentage of stock held for producing oil or gas for purposes of the Personal Holding Company (PHC) income test.
What is undistributed personal holding company income?
Undistributed personal holding company income is the portion of a corporation's personal holding company income that has not been distributed to its shareholders. For a PHC, this income is subject to the higher tax rate if it is not timely reported on Form 1120-PHC.
What is the tax treatment for a personal holding company (PHC)?
A personal holding company (PHC) pays a higher tax rate on its undistributed personal holding company income. The tax rate is 20% if the corporation timely files Form 1120-PHC, or 35% if it does not. If the PHC has net capital gains and it timely files Form 1120-PHC, it may pay a reduced tax rate of 20% on those gains.
What are passive activities for the purpose of determining if a corporation is a PHC?
For purposes of determining if a corporation is a PHC, passive activities include rents from real property, interest income, and royalties. A corporation's adjusted ordinary gross income must come primarily from these passive activities for it to be considered a PHC.
What types of income are separately adjusted in figuring adjusted ordinary gross income?
Rents, royalties from mineral, oil, and gas wells, compensation, and certain excluded interest income are separately adjusted in figuring adjusted ordinary gross income.
How does a corporation determine if it is a personal holding company (PHC)?
To determine if it is a personal holding company (PHC), a corporation must complete Worksheet 2 in the instructions for Schedule PH. If the percentage of adjusted ordinary gross income from passive activities is at least 60% and the stock ownership requirement of section 542(a) is met, the corporation is classified as a PHC.
What is the purpose of Schedule PH?
Schedule PH is used to determine whether a corporation is a personal holding company (PHC). If a corporation is classified as a PHC, it must file Form 1120-PHC in addition to Form 1120. A PHC pays a higher tax rate on its undistributed personal holding company income.
What is the effect of failing to meet the percentage requirement for a Personal Holding Company?
If a corporation does not meet the 60% or more requirement for the percentage test in determining whether it is a Personal Holding Company, then it is not treated as a Personal Holding Company and Schedule PH need not be filed.

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Tax forms

Form 1120 Schedule PH is one of Tax forms that are documents used to report income, deductions, and tax liability to the relevant tax authority. These forms are an essential part of the tax filing process and are used to ensure individuals and businesses comply with tax laws and accurately calculate their tax obligations.

The specific tax forms required can vary depending on factors such as an individual's filing status, sources of income, and the country's tax laws. However, here are some common types of tax forms:

Individual Income Tax Forms: These forms, such as the 1040 series in the United States, are used by individuals to report their income, claim deductions and credits, and calculate their tax liability.

Business Tax Forms: Businesses, including sole proprietorships, partnerships, corporations, and self-employed individuals, may have to file various forms to report their income, expenses, and taxes owed. Examples include Schedule C (Profit or Loss from Business) and Form 1120 (U.S. Corporation Income Tax Return).

Employment Tax Forms: Employers are required to report employee wages and withhold and remit payroll taxes. Forms such as W-2 (Wage and Tax Statement) and 941 (Employer's Quarterly Federal Tax Return) are used for this purpose.

Investment and Retirement Account Forms: These forms are used to report investment income, capital gains, and losses, as well as contributions and distributions from retirement accounts. Examples include Form 1099-DIV (Dividends and Distributions) and Form 5498 (IRA Contribution Information).

Estate and Gift Tax Forms: When a person passes away or makes significant gifts, specific forms such as Form 706 (United States Estate (and Generation-Skipping Transfer) Tax Return) and Form 709 (United States Gift (and Generation-Skipping Transfer) Tax Return) are used to report and calculate any applicable estate or gift taxes.

It is important to note that tax laws and forms can change over time, so individuals and businesses should consult the relevant tax authority or seek professional tax advice to ensure compliance with the current requirements.

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