§269A Personal Service Corporations Formed or Availed of to Avoid or Evade Income Tax

Summary

Says a corporation is treated as being set up or used to avoid federal income tax when almost all of its work is done for one other company or entity and the main reason for creating it is to lower taxes or give tax benefits to an owner-employee that they would not get otherwise. Definitions: personal service corporation — a company whose main work is providing personal services done mostly by owner-employees. employee-owner — any employee who owns more than 10 percent of the company on any day of the year (special stock-ownership rules apply, with 5 percent used instead of 50 percent in section 318(a)(2)(C)). related persons — people or entities related under section 144(a)(3) are treated as one.