GENERAL INSTRUCTIONS

(References are to the Internal Reve-
nue Code)

Corporations which must file Schedule
PH (1120).—Every personal holding
company must file'a Schedule PH. The
term “personal holding company” means
any corporation if at least 60 percent of
its adjusted ordinary gross income (as
defined in section 543(b)(2)) for the tax-
able year is personal holding company in-
come (as defined in section 543(a)), and
if at any time during the last half of the
taxable year more than 50 percent in
value of its outstanding stock is owned,
directly or indirectly, by or for not more
than five individuals.

For purposes of determining such
stock ownership, an organization de-

4

scribed in section 503(b) or a portion of
a trust permanently set aside or to be
used exclusively for the purposes de-
scribed in section 642(c) or a correspond-
ing provision of a prior income tax law
shall be considered an individual, unless
such organization or trust meets the re-
quirements of the last sentence of sec-
tion 542(a)(2).

For exceptions to the term “personal
holding company,” see section 542(c).

A foreign corporation (except one
which has income to which section 543
(a)(7) applies) is not a personal holding
company if all of its outstanding stock
during the last half of the taxable year is
owned by nonresident alien individuals,
whether directly or indirectly through for-
eign estates, foreign trusts, foreign part-

Detach this page before filing

nerships, or other foreign corporations.
See section 542(c)(7).

Failure of foreign corporation to file —
If a foreign corporation which is a per-
sonal holding company fails to file or
cause to be filed a true and accurate re-
turn of the tax imposed by section 541, a
penalty (in addition to any other applica-
ble penalties) shall be imposed equal to
10 percent of the taxes imposed by chap-
ter 1 of the Code (including personal
holding company tax) on such foreign
corporation for the taxable year. See sec-
tion 6683.

Personal holding company income.—
The term “personal holding company in-
come” is the portion of adjusted ordinary
gross income (as defined in section 543
(b)(2)) which consists of the items of in-
come described in section 543(a).

SPECIFIC INSTRUCTIONS (Numbered to correspond with line numbers on page 1 of this schedule)

1. Taxable income before net operat-
ing loss deduction and special deduc-
tions.—Enter the amount shown on line
28, page 1, Form 1120, computed in ac-
cordance with the provisions of subtitle
A, but without regard to section 443(b)
(relating to income placed on an annual
basis). In the event such taxable income
includes any amount with respect to coal
or domestic iron ore royalties, see section
631(c) and the regulations thereunder.

In the case of a foreign corporation
(whether or not engaged in a trade or bus-
iness within the United States) which
qualifies as a personal holding company
under section 542 but not as a foreign
personal holding company under section
552, the amount to be entered on line 1
must be computed under section 861
rather than under section 881(a).

In the case of a foreign corporation,
all of whose outstanding stock during the
last half of the taxable year is owned by
nonresident alien individuals (whether
directly or indirectly through foreign es-
tates, foreign trusts, foreign partnerships,
or other foreign corporations), taxable in-
come for purposes of section 545(a) is
that personal holding company income
described in section 543(a)(7), reduced
by deductions attributable to such in
come, and adjusted, with respect to such
income, in the manner provided in sec-
tion 545(b). See section 545(d).

3. Expenses and depreciation in ex-
cess of amount allowable under section
545(b)(8).—If the corporation derived
rent or other compensation for the use of,
or right to use, property which was less
than the sum of the expenses incurred in
connection therewith (and deductible
under section 162) and the depreciation
allowable under section 167, Schedule A
should be filled in and the excess shown
therein should be entered on line 3.

This adjustment must be made unless
the taxpayer establishes, in accordance
with section 545(b)(8), that the rent or
other compensation received was the
highest obtainable, or, if none was re-
ceived, that none was obtainable; that the
property was held in the course of a busi-
ness carried on bona fide for profit; and
either that there was reasonable expecta-
tion that the operation of the property
would result in a profit, or that the prop-
erty was necessary to the conduct of the
business.

The burden of proof will rest upon the
taxpayer to sustain the excess deduc-
tions. A corporation claiming such excess
deductions shall, in lieu of filling in Sched-
ule A, attach a statement setting forth its
claim for allowance of the deductions to-
gether with a complete statement of facts,
circumstances, and arguments on which
it relies in support of the deductions.
Such statement must show the informa-
tion required by section 1.545-2(h)(2) of
the regulations.

4. Amount added to taxable income
where lien in favor of the United States
is satisfied or released.—The sum of the
amounts deducted under section 545(b)
(9) for any lien in favor of the United
States must be added to taxable income
in the taxable year in which the lien is
satisfied or released. Similarly, in the case
of a partial satisfaction or release of such
lien, to the extent satisfied or released.

Where an amount is so added the
shareholders may elect to compute the
tax on dividends attributable to the added
income as though they were received
ratably over the period the lien was in
effect. See instruction 13.

6. Federal and foreign income, war
profits, and excess profits taxes.—Attach
a schedule showing the nature of the tax,
the taxable year, and the amount. Section
545(b)(1) allows a deduction for Federal
income and excess profits taxes accrued
or deemed to be paid under section 902
(a)(1) or 960(a)(1)(C) but not including
the accumulated earnings tax imposed by
section 531 or the personal holding com
pany tax imposed by section 541.

The foreign tax credit allowed by sec-
tion 901 is not allowed as a credit against
personal holding company tax. There
shall be allowed as a deduction from tax-
able income, however, the income, war
profits, and excess profits taxes accrued
(or deemed paid under section 902(a)(1)
or 960(a)(1)(C)) during the taxable year
te foreign countries and possessions of
the United States if the taxpayer claims
a credit for such taxes in computing its
income tax.

7. Contributions deductible under sec-
tion 545(b)(2).—For purposes of the per-
sonal holding company tax, section 545
(b)(2) provides a different limitation for
Charitable contributions than the 5-per-
cent limitation for purposes of determin-

ing the corporate income tax. The limita-
tions on charitable deductions of indi-
viduals are applicable but are to be ap-
plied to the amount of taxable income to
which the 5-percent limitation applied.
(See instruction 19, Form 1120.) How-
ever, taxable income shall be computed
without the deduction of the amount dis-
allowed under section 545(b)(8) (relating
to excess expenses and depreciation).

For purposes of the personal holding
company tax, the contribution carryover
under the provision of sections 170(b)
(2) and 170(b)(5) is not allowed (section
545(b)(2)).

8. Net operating loss for the preceding
year deductible under section 545(b)
(4).—Section 545(b)(4) provides that in
lieu of the net operating loss deduction
provided in section 172 there shall be al-
lowed the amount of the net operating
loss (as defined in section 172(c)) for the
preceding taxable year computed with-
out the deductions provided in sections
241 through 247.

11. Amounts used or irrevocably set
aside to pay or retire indebtedness of any
kind incurred prior to January 1, 1934.—
Section 545(b)(7) provides that in deter-
mining undistributed personal holding
company income there shall be allowed
as a deduction amounts used or irrevo-
cably set aside to pay or retire indebted-
ness of any kind incurred before January
1, 1934, if such amounts are reasonable
with reference to the size and terms of
such indebtedness.

The corporation must furnish all of the
facts and circumstances upon which it
relies to establish the reasonableness of
the amount claimed as a deduction.

Describe fully in an attached state-
ment, a description of the indebtedness,
the date incurred or assumed, the date
due, the plan for payment or retirement
of the obligations (indicating date and
method of adoption), and, where the plan
is covered by a mandatory sinking fund
agreement or similar arrangement, sub-
mit a copy of the indenture or agreement
by which the fund was established and
under which it is maintained.

Such statement shall also include: (1)
The amount of indebtedness on January
1, 1934; (2) Aggregate of amounts used
or irrevocably set aside to pay or retire
such indebtedness in prior taxable years
beginning on and after January 1, 1934:

Schedule PH (1120) 1967 Page 5




(3) Amount actually used during the tax-
able year to pay or retire the indebted-
ness; and (4) Amount irrevocably set
aside during the taxable year to pay or
retire the indebtedness but not actually
used during the taxable year for such pur-
pose. In addition, the statement shall in-
dicate whether the deduction claimed
represents (a) an amount actually used
during the taxable year to pay or retire the
indebtedness, (b) an amount irrevocably
set aside during the taxable year to pay or
retire the indebtedness, or (c) a combina-
tion of both (a) and (b).

If the amount claimed as a deduction
on line 11 or 12, page 1 of this return,
represents an amount irrevocably set
aside to pay or retire the indebtedness,
explain fully in an attached statement the
circumstances and method by which it
was irrevocably set aside.

12. Amounts used or irrevocably set
aside to pay or retire qualified indebted-
ness.—Subject to the limitations de-
scribed in section 545(c), section 545(c)
(1D) allows a deduction for amounts used,
or amounts irrevocably set aside (to the
extent reasonable with reference to the
size and terms of the indebtedness), to
pay or retire qualified indebtedness (as
defined in section 545(c)(3)). This deduc-
tion applies only to corporations de-
scribed in section 545(c)(2).

_ Any corporation that claims a deduc-
tion for amounts used or irrevocably set
aside to pay or retire qualified indebted-
ness must submit detailed information
and any necessary computation showing
that it is a corporation described in sec-
tion 545(c)(2)(A) or to the extent that it
succeeds to such deduction by reason of
section 381(c)(15), it must submit de-
tailed information showing that the dis-
tributor or transferor corporation was a
corporation described in section 545
(c)(2)(A).

_ Corporations succeeding to the deduc-
tion by reason of section 381(c)(15)
should make necessary adjustments to
Schedule C-2 to take into account such
indebtedness.

Schedule C-2 should be completed in
all cases where qualified indebtedness
has changed during the taxable year, even
though no payments or set-asides were
made and no deduction is being claimed.

See instruction 11 for additional infor-
mation which must be submitted to es-
tablish the reasonableness of amounts
irrevocably set aside to pay or retire qual-
ified indebtedness.

Election to Treat as Nondeductible Cer-
tain Amounts Used or Irrevocably Set
Aside to Pay or Retire Qualified Indebt-
edness Which Are Otherwise Deductible
Under Section 545(c)(1).—Section 545
(c)(4) provides that a taxpayer may elect
to treat as nondeductible amounts other-
wise deductible under section 545(c)(1)

Page 6 — Schedule PH (1120) 1967

SPECIFIC INSTRUCTIONS—Continued

for the taxable year. The election shall be
in the form of a statement of election
filed on or before the 15th day of the third
month following the close of the taxable
year with respect to which the election
applies, and shall be irrevocable after
such date

The statement must be attached to the
corporation’s income tax return for the
year to which the election applies, if the
return is filed on or before the 15th day
of the third month following the close of
the taxable year. If an extension of time
is granted for filing the corporation's in-
come tax return, the statement must
show the corporation's name, address,
and identifying number, be signed by a
corporate officer, and filed with the in-
ternal revenue officer with whom the cor-
poration would file its income tax return
if it were filed on or before the 15th day
of the third month following the close of
the taxable year.

The statement must include the fol-
lowing information:

(1) Taxpayer's name, address,
empioyer identification number;

(2) A statement that the taxpayer
wishes to elect in accordance with sec-
tion 545(c)(4);

(3) The amounts paid or set aside
which are to be treated as nondeductible
under section 545(c)(4);

(4) All information necessary to iden-
tify the qualified indebtedness with re-
spect to which such amounts were paid
or set aside;

(5) The date on which such payments
or Set-asides were made; and

(6) All information necessary to iden-
tify the indebtedness referred to in sec-
tion 545(c)(3)(A)(ii) incurred for the
purpose of making the payments or set-
asides which the taxpayer elects to treat
as nondeductible, including—

(a) The date on which such indebted-

ness was incurred,

(b) The amount of such indebtedness,

(c) The person or persons to whom

such indebtedness is owed, and

(d) A statement that such person or

persons do not own more than 10
percent in value of the taxpayer's
outstanding stock.

and

13. Lien in favor of the United
States.—The taxpayer may deduct the
amount of any lien in favor of the United
States (notice of which has been filed as
provided in section 6323(f)) to which the
taxpayer is subject at the close of the tax-
able year. However, the amount deducted
may not exceed taxable income as ad-
justed under sections 545(b) and 545(c),
computed without regard to this deduc-
tion. Thus, the deductions may not ex-

‘fc Se dr dy US. GOVERNMENT PRINTING OFFICE -1967—O-260-028

ceed line 5 less the total of lines 6
through 12, inclusive.

14. Deduction for dividends paid.—
Enter the amount of the dividends-paid
deduction as computed in Schedule B.
Section 561 provides that the deduction
for dividends paid is the sum of (1) the
dividends paid during the taxable year,
(2) the consent dividends for the taxable
year, and (3) the dividend carryover from
the 2 preceding taxable years.

For purposes of determining the deduc-
tion for dividends paid, the rules provided
in section 562 shall be applicable.

17. Dividends paid after close of tax-
able year (excluding deficiency dividends
as defined in section 547 (d)).—Enter on
line 17 and not in Schedule B, the amount
of the dividends paid after the close of
the taxable year and on or before the 15th
day of the third month thereafter, if the
taxpayer elects in its return for the tax-
able year to have such dividends con-
sidered as paid during such taxable year.

Neither line 14 nor line 17 should in-
clude “deficiency dividends.” The term
“deficiency dividends’’ means in general
only those dividends which are paid pur-
suant to a specific procedure set forth
in section 547, which includes a require-
ment that there must first be a deter-
mination by a court, by closing agree-
ment, or (under regulations) a written
agreement signed by the District Direc-
tor and by or on behalf of the taxpayer
relating to the liability of the corpora-
tion for personal holding company tax.

18. Undistributed personal holding
company income of certain foreign cor-
porations.—If 10 percent or less in value
of the outstanding stock of a foreign cor-
poration is owned (see section 958(a))
during the last half of the taxable year by
United States persons, undistributed
personal holding company income-is the
amount determined by multiplying the
undistributed personal holding company
income (as determined without regard to
this instruction) by the percentage in
value of the corporation's outstanding
stock which is the greatest percentage in
value of its outstanding stock so owned
by United States persons on any one day
during such period. See section 545(a).

In the case of a foreign corporation, all
of whose outstanding stock during the
last half of the taxable year is owned by
nonresident alien individuals (whether
directly or indirectly through foreign es-
tates, foreign trusts, foreign partnerships,
or other foreign corporations), taxable in-
come for purposes of section 545(a) is
that personal holding company income
described in section 543(a)(7), reduced
by deductions attributable to such in-
come, and adjusted, with respect to such
income. in the manner provided in sec-
tion 545(b). See section 545(d).


SCHEDULE PH
(Form 1120)

U.S, Treasury Department
Internal Revenue Service

For calendar year 1967, or other taxable year

Computation of U.S. Personal Holding Company Tax 1967

beginning 1967, and ending .... 119.
Name | Employer Identification Number

i
COMPUTATION OF UNDISTRIBUTED PERSONAL HOLDING COMPANY INCOME

1 Taxable income before net operating loss deduction and special deductions (line 28, Form |
1120) Fe woe ee

|
2 Contributions deducted in computing line 1 (line 19, Form 1120). 2 1 1 kk kn feseeceneneteseseeeteseetetenetee

Excess of expenses and depreciation under section 545(b)(8) (Schedule A). ©. 11s | onesseeseeesesseteseseteeteneeee

ADDITIONS
w

4 Amount added to taxable income where lien in favor of the United States is satisfied or
released . Be

5 Total of lines 1 through 4 .

6 Federal and foreign income, war profits, and excess profits taxes not deducted in computing
line 1 (attach schedule) . : . . Soe

7 Contributions deductible under section 5450012) (attach schedule—see instructions for
limitation) . 2 6 6 ee nn fete eeeetetentteeeteeeeee -

Co

Net operating loss for the preceding taxable year deductible under section 545(b)(4). 0. «| -----------+-

©

(a) Excess of net long-term capital gain over net short-term capital | |
loss (line 14, separate Schedule D, Form 1120) ~. |

(b) Less: Income tax attributable to such excess (attach computation |
if amount is different from line 22, separate Schedule D, |
Form 1120) . . . Sone ee a 9

10 Special deduction for bank affiliates allowable under section 545(b)(6) .

2 11 Amounts used or irrevocably set aside to pay or retire indebtedness of any kind incurred prior
2 to January 1, 1934 (attach schedule—see instructions) . rn
°
>
8 12 Amounts used or irrevocably set aside to pay or retire qualified indebtedness (Schedule C1).
)
13 Amount of a lien in favor of the United States (see instructions for limitation) .
14 Deduction for dividends paid (excluding dividends s paid 2 after close of taxable ° year) Gchedule
B)
15 Total of lines 6 through 14 .
16 Undistributed personal holding company income before the deduction shown on line 17
(line 5 less line 15) woe . soe ee . .
17 Less: Dividends paid after close of taxable year (excluding deficiency dividends as defined
in section 547(d)) but not in excess of the lesser of line 16 or 10 percent of line 1,
Schedule B .
18 Undistributed personal holding ¢ company income ‘ine 16 less ‘line ° 17) Foreign corporations
| see instruction 18 . oo
z
| 19 Personal holding company tax due (amount on line 18 multiplied by 70 percent) .



Schedule PH (1120) 1967 Page 2

INFORMATION REQUIRED UNDER SECTION 6501(f). Section 6501(f) provides that if the information in (1) and (2) below is
not submitted with the corporation’s return, the limitation period for assessment and collection of personal holding company tax
shall be 6 years

(1) Personal Holding Company Income

1 Dividends
2 Interest .

(a) Less: Amount excluded under section 543(0)(2)(0) (attach schedule)

3 Royalties (other than mineral, oil, or gas royalties or copyright royalties)

4 Annuities

5 Rents : :

(a) Less: Adjustments described in section 543(0)(2)(A) ‘(attach schedule) :

6 Mineral, oil, and gas royalties . .
(a) Less: Adjustments described in section 543()(2)(8) | (attach schedule) .

7 Copyright royalties . . .

8 Produced filmrents . 1. 6 ee ee ee ee :

9 Amounts received as compensation for use of corporation property by shareholder

10 Amounts received under personal service contracts and from the sale thereof .
11 Amounts received from estates and trusts. Co

12 Total personal holding company income -

(2) Stock Ownership
Enter the names and addresses of the individuals who owned, in the aggregate, directly or indirectly, at any time during the last half of the taxable
year, more than 50 percent in value of the outstanding stock of the corporation.

] ighest percentage of shares owned during last haif of taxable year
Name if Address — —— —

Preferred ‘Common

().

2)

@)

4)...

fo) = _ I i

Schedule A—EXCESS OF EXPENSES AND DEPRECIATION OVER INCOME FROM PROPERTY NOT ALLOWABLE UNDER SECTION 545(b)(8)
(See instruction 3)

s, insu ] |. TeIncome from |
2. Date. | 3. Cost or other |S. Repairs, insurance, and 6. Total of |8. Excess (col. 6
1. Kind of property 4. Depreciation |"other expenses (section | ientorather |
acquired basis | 18) ome velow oluinas 4 and § | tet

@)
(b)

O_ | t-

a competion
|

Total excess of expenses and depreciation over rent or other compensation. Enter here and on line 3, page 1.

Explanation of expenses entered in column 5 .

‘State the names and addresses of persons from whom rent or other compensation was received for the use of, or the right to use, each property.

Schedule B.—DEDUCTION FOR DIVIDENDS PAID (See instruction 14)

1 Taxable dividends paid, excluding (a) dividends considered as paid in the preceding taxable year under section 563,
and (b) deficiency dividends as defined in section 547

2 Consent dividends (attach schedule) .

3 Taxable distributions (total of lines 1 and 2) . . foe

4 Dividend carryover from first and second preceding taxable years (attach 1 computation)

5 Deduction for dividends paid (total of lines 3 and 4). _Enter here and on line 14, page 1



If no entries are made on this page, detach and file pages 1 and 2 ony-t
Schedule PH (1120) 1967

Page 3

‘Schedule _C-1.—COMPUTATION 9B DEDUCTION FOR AMOUNTS USED OR IRREVOCABLY SET ASIDE TO PAY OR RETIRE QUALIFIED
ion

INDEBTEDNESS (See Instru

1 Indicate separately:
(a) Amount actually used during the taxable year covered by this return to pay or retire qualified indebtedness

(except payments from amounts irrevocably set aside before the taxable year to pay or retire qualified in- |

debtedness with respect to a contract, as described in section 545(c)(3)(C)) coe
(b) Amount irrevocably set aside during the taxable year covered by this return to pay or retire qualified in-
debtedness, but not actually used during the taxable year for such purpose .
(©) Total. 2 wwe oe
2 Reduction for amounts described in section 545(€)(5) (attach schedule)
3 Line 1(c) less line 2 . Se a : oe
4 Portion of amount shown on line 3 which is treated as nondeductible by reason of the election provided in section
545(c)(4) (attach statement—see instructions) So
5 Amount claimed as a deduction (line 3 less line 4). Enter here and on line 12, page 1

Sch

je C-2.COMPUTATION OF QUALIFIED INDEBTEDNESS. NOTE.—If you were a personal holding compai

were not a personal holding company for the preceding taxable year, complete all applicable lines.

r pany for the preceding taxable year
omit lines 1 through 6 and enter on line 7 the amount of qualified indebtedness as of the beginning of the taxable year covered by this return.

if you

Enter amount of indebtedness which was incurred after December 31, 1933, and before January 1, 1964, and which
was outstanding as of the first day of the first taxable year beginning after December 31, 1963 .

ny

Less: Amounts included in line 1 which were irrevocably set aside before the first day of the first taxable year begin-
ning after December 31, 1963, to pay or retire indebtedness with respect to a contract (section 545(c)(3)(C)) .

w

“ft
Aggregate amount of indebtedness incurred after December 31, 1963, and before the taxable year covered by this |

a

return, for the purpose of making a payment or set-aside in the same taxable year, but, in the case of such a pay-
ment or set-aside, enter such indebtedness only to the extent the deduction otherwise allowed in section 545(c)(1)
for such payment or set-aside was treated as nondeductible by reason of the election provided in section 545(c)(4).
(See section 545(c)(3)(A)(ii)) «

Total of lines 3 and 4.

Less: (a) Aggregate of amounts actually used or irrevocably set aside (including amounts
which were treated as nondeductible by reason of the election provided in sec-
tion 545(c)(4)) to pay or retire qualified indebtedness in taxable years begin-
ning after December 31, 1963 (not including taxable year covered by this return). |...

aa

(b) Aggregate amount of pro-rata reductions in taxable years beginning after De-
cember 31, 1963 (not including taxable year covered by this return) with re-
pect to disposition of certain property after December 31, 1963 (section
545(0)(6)). - . . e arn

©

Aggregate of amounts which ceased to be outstanding during taxable years be-
ginning after December 31, 1963 (not including taxable year covered by this re-
turn) other than as a result of a payment or set-aside (attach statement)

Line 1 less line2. . . . . wk.

x

Line 5 less line 6 . SY
Total indebtedness incurred during the taxable year for the purpose of 1 making a payment or set-aside in the same

taxable year, but, in the case of such a payment or set-aside, enter such indebtedness only to the extent the deduc-
tion otherwise allowed in section 545(c)(1) for such payment or set-aside is treated as nondeductible by reason of
the election provided in section 545(c)(4). (See section 545(c)(3)(A)(ii))
9 Line 7 plus line 8. oo So ee : a
10 Less: (a) Amounts included in line 9 which were, at any time after December 31, 1963, |
and before payment or set-aside, owed to a person who at such time owned (or
was considered as owning within the meaning of section 318(a)) more than 10
percent in value of your outstanding stock. NOTE.—lIf you were a personal
holding company for the preceding taxable year, enter such amounts which were

owed at any time on or after the first day of the taxable year covered by this
return (section 545(c)(3)(B)) . srr cerns

(b) Pro-rata reduction with respect to disposition of certain property during the tax:
able year (section 545(c)(6)) . :

11 Line 9 less line 10 Se
12 Less: Amounts included in line 11 which ceased to be outstanding during the taxable year other than as a result of
a payment or set-aside (attach statement)

13 Qualified indebtedness before payments and set-asides (line 11 less line 12) .
14 Amounts used or irrevocably set aside (including amounts which were treated as nondeductible le by reason of the elec-

tion provided in section 545(c)(4)) during the taxable year to pay or retire amount shown on line 13... . |

15 Qualified indebtedness as of end of taxable year (line 13 less line 14)