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If I own one repair shop and I am looking to purchase another one can I start a holding company and not be classified as a personal holding company?

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1 Answer

According to this:

Personal holding company

In the United States, a personal holding company is defined in section 542 of the Internal Revenue Code. A corporation is a personal holding company if both of the following requirements are met:2

* Personal Holding Company Income Test: 
  At least 60% of the corporation's adjusted ordinary gross income 
  for the tax year is from dividends, interest, rent, and royalties.

* 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 owned, 
  directly or indirectly, by five or fewer individuals.

Now, I am not an accountant or CPA or attorney, but it seems to me that you can't do anything much about part 2, but if you can insure that more than 40% of the income from the business(es) come from thing other than those listed then you are ok.

I don't know how the treatment is different for personal holding companies compared to "Regular" holding companies.

EDIT - here is the reason I guess:

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Thank you for your input. – John Oct 7 '10 at 0:02

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