General Instructions

Purpose of Schedule

Use Schedule PH to figure the personal holding company (PHC) tax.

Who Must File

A corporation that is a PHC must file Schedule PH by attaching it to its income tax return.

Personal Holding Company

Generally, a corporation is a PHC if it meets both of the following requirements.

  1. PHC income test. At least 60% of the corporation's adjusted ordinary gross income for the tax year is PHC income. See the instructions for Part II and the Worksheet for Figuring Ordinary Gross Income, Adjusted Ordinary Gross Income, and the PHC Income Test (Worksheet), later. Also, see Specific Instructions below.

  2. Stock ownership requirement. At any time during the last half of the tax year, more than 50% in value of the corporation's outstanding stock is directly or indirectly owned by five or fewer individuals.

    For purposes of this requirement, the following organizations are considered individuals.

    • A qualified pension, profit-sharing, or stock bonus plan described in section 401(a).

    • A trust described in section 501(c)(17) that provides for the payment of supplemental unemployment compensation under certain conditions.

    • A private foundation described in section 509(a).

    • A part of a trust permanently set aside or exclusively used for the purpose described in section 642(c).

Exceptions.   The term “personal holding company” does not include the following corporations, even if the two requirements above are met.
  • Tax-exempt corporations.

  • Banks, domestic building and loan associations, and certain lending or finance companies.

  • Life insurance and surety companies.

  • Certain small business investment companies operating under the Small Business Investment Act of 1958.

  • Corporations under the jurisdiction of the court in a title 11 or similar case.

  • Foreign corporations.

At-risk, passive activities, and earnings stripping rules.   A corporation that has an activity subject to the at-risk or passive activity rules or interest expense subject to the earnings stripping rules (or both) may have deductions and losses suspended or limited under these rules. As a result, do not use deductions and losses limited or suspended in any of the PHC computations. Treat any prior year deductions and losses allowed under the at-risk, passive activity, and earnings stripping rules as current year deductions and losses.

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