Farnham Mfg. Co. v. Commissioner
United States Tax Court
During the taxable years, petitioner was engaged in designing and engineering special machinery to be used in manufacturing airplane wings. Its capital stock was owned by four stockholders, all of whom were regularly engaged in the active conduct of the business. Capital was not an income-producing factor. Held, petitioner is entitled to personal service classification under the provisions of section 725, I. R. C.
1Opinion of the Court
OPINION.
Van Fossan, Judge:
We have before us the sole question whether or not the petitioner is entitled to be classified as a personal service corporation within the purview of section 725 of the Internal Revenue Code.1
The statute itself provides a definition which sets forth the following essential elements:(1) The income of the corporation must be ascribed primarily to the activities of its shareholders.(2) They must be regularly engaged in the active conduct of its affairs.(3) They must be the owners of at least 70 per cent in value of each class of its stock.(4) Capital must not be a…
2Cases cited1 opinion
- Whittelsey, Inc. v. CommissionerUnited States Tax Court · 1947
3Cited by1 opinion
- Farnham Mfg. Co. v. CommissionerUnited States Tax Court · 1949