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What is the personal holding company tax?

Personal holding companies that are required to pay personal holding tax will be subject to an additional 20% tax on personal holding income. Personal holding corporations will be subject to a penalty tax if they meet certain criteria: 

Criteria #1: Over 50% of the value of the outstanding stock should be owned by five or fewer individuals during any period within the second half of the taxable year.

Criteria #2: 60% or more of the gross income should consist of income from passive investments (e.g., interest, dividends, rents, royalties).

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