SCHEDULE PH

(Form 1120) U. S. Treasury Department 

Internal Revenue Service

FOR CALENDAR YEAR 1964

or other taxable year beginning ,1964, and ending , 19

Name and address Employer Identification No.

UNDISTRIBUTED PERSONAL HOLDING COMPANY INCOME COMPUTATION

Instruction

and Line No.

1. Taxable income before net operating loss deduction and special deductions from Form 1120 (line 28)

Additions:

2. Contributions or gifts deducted in computing line 1 (line 19, Form 1120)

3. Excess of expenses and depreciation under section 545 (b) (8). (Schedule A)

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

released

5. Total of lines 2 to 4, inclusive

6. Total of lines 1 and 5

Deductions:

7. Federal and foreign income, war-profits, and excess profits taxes. (Not deducted in computing

line 1) (Attach schedule)

8. Contributions or gifts deductible under section 545 (b) (2). (Attach schedule—see instructions

 for limitation)

9. Net operating 1oss for the preceding taxable year deductible under section 545 (b) (4)

10. Excess of net long-term capital gain over net short-term capital

loss (line 14, separate Schedule D, Form 1120)

Less: Income tax attributable to such excess. (Attach 

 computation if amount is different from line 21, sepa-

----------------------------- rate Schedule D, Form 1120)

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

15. Deduction for dividends paid (excluding dividends paid after close of taxable year).

(Schedule B)

16. Total of lines 7 to 15, inclusive

17. Undistributed personal holding company income before the deduction shown on line 18 (line 6, minus line 16)

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 17 or 10% of line 1, Schedule B

18.

19. Undistributed personal holding company income (line 17 minus line 18)

COMPUTATION OF TAX

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12. Amounts used or irrevocably set aside to pay or retire indebtedness of any kind incurred

 prior to January 1, 1934. (Schedule C)

13. Amounts used or irrevocably set aside to pay or retire qualified indebtedness. (Schedule D-1)

14. Amount of a lien in favor of the United States. (See instructions for limitations) -----------------------------

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20. Personal Holding Company tax due (amount on line 19 multiplied by 70%). Enter here and on Form 1120 (line 8, Tax 

 Computation Schedule, page 3,) or Form 1120-F (line 12, page 2 or line 6, Tax Computation Schedule, page 5), 

 whichever is applicable). . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Page 2

SCHEDULE REQUIRED UNDER SECTION 6501 (f) (See page 6)

 (a) Personal Holding Company Income

---------------------------- 1. Dividends

---------------------------- 2. Interest

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

---------------------------- 4. Annuities

---------------------------- 5. Rents

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10. Amounts received under personal service contracts and from the sale thereof

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

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6. Mineral, oil, or gas royalties

7. Copyright royalties

12. Total personal holding company income

(b) Stock Ownership

Enter below 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:

Highest percentage of shares owned during last half of taxable year

Name Address

Preferred Common

(1)

(2)

(3)

(4)

(5)

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

 (See Instruction 3)

1. Kind of Property 3. Cost or Other Basis 4. Depreciation

(a)

(b)

(c)

(d)

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

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5. Rapairs, Insurance, and Other

Expenses (section 162)

(Itemize below)

6. Aggregate of Expenses

and Depreciation in

Columns 4 and 5

7. Income from Rent or

Other Compensation

8. Excess (Column 6

minus Column 7)

2. Date

Acquired

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Schedule PH (1120) 1964

(a) Less: Adjustments described in section 543 (b) (2) (A). (Attach schedule.)

(a) Less: Adjustments described in section 543 (b) (2) (B). (Attach schedule.)

8. Produced film rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11. Amounts received from estates and trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Schedule B.—DEDUCTION FOR DIVIDENDS PAID. (See Instruction 15)

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)

4. Dividend carryover from first and second preceding taxable years. (Attach schedule of computation)

5. Deduction for dividends paid (total of lines 3 and 4). Enter here and on line 15, page 1

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(See page 4 for General Instructions)

(a) Less: Amount excluded under section 543 (b) (2) (C). ( Attach schedule.) . . . . . . . . ----------------------------

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Schedule PH (1120) 1964 Page 3

Schedule C.—AMOUNTS USED OR IRREVOCABLY SET ASIDE TO PAY OR RETIRE INDEBTEDNESS INCURRED PRIOR TO JANUARY 1, 1934* (See Instruction 12)

1. Amount of indebtedness on January 1, 1934

2. Aggregate of amounts used or irrevocably set aside to pay or retire such indebtedness in taxable years beginning on

and after January 1, 1934 (not including taxable year covered by this return)

3. Balance (line 1 less line 2)

4. Amounts used or irrevocably set aside during taxable year covered by this return to pay or retire such indebtedness

5. Balance of indebtedness (line 3 less line 4)

6. Indicate separately:

(a) Amount actually used during the taxable year covered by this return to pay or retire the indebtedness

(b) Amount irrevocably set aside during the taxable year covered by this return to pay or retire the indebtedness,

but not actually used during the taxable year for such purpose

7. Portion of amount entered on line 4 above claimed as a deduction for the taxable year covered by this return. Enter

here and on line 12, page 1

Indicate by check mark whether the deduction claimed on line 12, page 1 of this return, represents:

A Amount actually used during the taxable year to pay or retire the indebtedness; B Amount irrevocably set aside during the

taxable year to pay or retire the indebtedness; or C Combination of both A and B.

Schedule D-1.—COMPUTATION OF DEDUCTION FOR AMOUNTS USED OR IRREVOCABLY SET ASIDE TO PAY OR RETIRE QUALIFIED INDEBTEDNESS* 

(See Instruction 13)

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

indebtedness with respect to a contract, as described in section 545 (c) (3) (C))

(b) Amount irrevocably set aside during the taxable year covered by this return to pay or retire qualified indebtedness, but not actually used during the taxable year for such purpose

(c) Total

2. Reduction for amounts described in section 545 (c) (5). (Attach schedule)

3. Balance (line 1 (c) less line 2)

4. Portion of amount shown on line 3 which is treated as nondeductible by reason of the election provided in section

545 (c) (4)

5. Amount claimed as a deduction (line 3 less line 4). Enter here and on line 13, page 1

Schedule D-2.—COMPUTATION OF QUALIFIED INDEBTEDNESS* (See Instruction 13)

1. (a) Outstanding indebtedness as of beginning of taxable year which was incurred after

December 31, 1933, and before January 1, 1964

(b) Total indebtedness incurred after December 31, 1963, for the purpose of making a pay2. Less: (a) Amounts irrevocably set aside before the taxable year to pay or retire indebtedness with respect to a contract (section 545 (c) (3) (C)

(b) Amounts included in line 1 which were, at any time after December 31, 1963,

(c) Pro-rata reduction with respect to disposition of certain property after December

31, 1963, and before the end of the taxable year (section 545 (c) (6))

3. Line 1 less line 2

4. Amounts included in line 3 which ceased to be outstanding during the taxable year other than as a result of a payment

or set-aside (attach statement)

5. Qualified indebtedness before payments and set-asides (line 3 less line 4)

6. Less amounts used or irrevocably set aside during the taxable year to pay or retire amount shown on line 5

(See page 4 for General Instructions)

ment 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 deduction 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).)

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 (section 545 (c) (3) (B))

7. Qualified indebtedness as of end of taxable year (line 5 less line 6)

* There must be furnished all of the facts and circumstances upon which the taxpayer relies to establish the reasonableness of the amount claimed 

as a deduction in Schedule C, and in the case of amounts irrevocably set aside in Schedule D-1. Describe fully in an attached statement, 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, submit a copy of the indenture or agreement 

by which the fund was established and under which it is maintained.

If the amount claimed as a deduction on line 12 or 13, 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.

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Corporations which must file Schedule PH (1120).—Every corporation 

which comes within the classification of a “personal holding company” must file 

a Schedule PH. The term “personal holding company” means any corporation, 

other than those listed in the exceptions below, if at least 60 percent of its 

adjusted ordinary gross income (as defined in section 543 (b) (2)) for the taxable 

year is personal holding company income (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 5 

individuals. For purposes of determining such stock ownership, an organization 

described in section 503 (b) or a portion of a trust permanently set aside or to be 

used exclusively for the purposes described in section 642 (c) or a corresponding 

provision of a prior income tax law shall be considered an individual, unless 

such organization or trust meets the requirements of the last sentence of section 

542 (a) (2).

In the case of corporations filing consolidated returns, see section 542 (b).

The term “personal holding company,” as referred to above, does not include 

any of the following:

(1) A corporation exempt from tax under subchapter F (section 501 and 

following) ;

(2) a bank as defined in section 581, or a domestic building and loan

(3) a life insurance company;

(4) a surety company;

(5) a foreign personal holding company as defined in section 552; 

(6) a lending or finance company (as defined in section 542 (d)) which

 falls within the provisions of section 542 (c) (6);

(7) a foreign corporation the gross income and stock ownership of 

which falls within the provisions of section 542 (c) (7); and 

(8) a small business investment company as defined in section 542 

(c) (8).

A foreign corporation, whether resident or nonresident, which is classified as 

a personal holding company under section 542 (not including a foreign personal 

holding company as defined in section 552) is subject to the tax imposed by 

section 541 with respect to its income from sources within the United States 

even though such income is not fixed or determinable annual or periodical 

income specified in section 881 (a). (See section 861.) In the case of a 

nonresident foreign corporation, Schedule PH shall be attached to Form 1120–F. 

The term “personal holding company” as used in subtitle (A) does not include a 

foreign corporation if (1) its gross income from sources within the United States 

for the period specified in section 861 (a) (2) (B) is less than 50 percent of its 

total gross income from all sources and (2) all of its stock outstanding during the 

last half of the taxable year is owned by nonresident alien individuals, whether 

directly or indirectly through other foreign corporations.

(a) CONSTRUCTIVE OWNERSHIP.—For purposes of determining whether a 

corporation is a personal holding company, insofar as such determination is 

based on stock ownership under section 542 (a) (2), section 543 (a) (7), section 

543 (a) (6), or section 543 (a) (4)—

(1) STOCK NOT OWNED BY INDIVIDUAL.—Stock owned, directly or 

indirectly, by or for a corporation, partnership, estate, or trust shall be 

considered as being owned proportionately by its shareholders, partners, or 

beneficiaries.

(2) FAMILY AND PARTNERSHIP OWNERSHIP.—An individual shall be 

considered as owning the stock owned, directly or indirectly, by or for his 

family or by or for his partner. For purposes of this paragraph, the family of 

an individual includes only his brothers and sisters (whether by the whole 

or half blood), spouse, ancestors, and lineal descendants.

(3) OPTIONS.—If any person has an option to acquire stock, such stock 

shall be considered as owned by such person. For purposes of this 

paragraph, an option to acquire such an option and each one of a series of 

such options, shall be considered as an option to acquire such stock. 

(4) APPLICATION OF FAMILY-PARTNERSHIP AND OPTION RULES.—

Paragraphs (2) and (3) shall be applied—

Page 4

(See pages 5 and 6 for additional instructions)

GENERAL INSTRUCTIONS (References are to the Internal Revenue Code)

Exception for certain corporations. —If there is a complete liquidation of a 

corporation referred to in section 333 (g) (3), and if the distribution of all the 

property under such liquidation occurs before January 1, 1966, in determining 

whether the corporation is required to file Schedule PH the provisions of the 

Code relating to the definition of a personal holding company as applicable to 

taxable years beginning before January 1, 1964, shall apply. However, in the 

case of a liquidation to which section 332 applies, the preceding sentence shall 

apply only if the corporate distributee (referred to in section 332 (b) (1)) in such 

liquidation is liquidated in a complete liquidation to which section 332 does not 

apply, and the distribution of all the property under such liquidation occurs not 

later than December 31, 1965, and before the 91st day after the last distribution 

referred to in the preceding sentence.

Personal holding company income.—The term “personal holding company 

income” is defined by section 543 (a) as the portion of the adjusted ordinary 

gross income (as defined in section 543 (b) (2)) which consists of:

1. Dividends, interest, royalties (other than mineral, oil, or gas royalties

 or copyright royalties), and annuities;

2. The adjusted income from rents;

3. The adjusted income from mineral, oil, and gas royalties;

4. Copyright royalties;

5. Produced film rents;

6. Amounts received as compensation for use of corporation property

 by shareholder;

7. Amounts received under personal service contracts and from the sale

 thereof; and;

8. Amounts received from estates and trusts.

For a more detailed explanation, see section 543 (a).

Stock ownership.—Section 544 contains the following provisions with 

reference to stock ownership.

(A) for purposes of the stock ownership requirement provided in 

section 542 (a) (2), if, but only if, the effect is to make the corporation a 

personal holding company;

(B) for purposes of section 543 (a) (7) (relating to personal service 

contracts), of section 543 (a) (6) (relating to the use of property by 

shareholders), or of section 543 (a) (4) (relating to copyright royalties), if, 

but only if, the effect is to make the amounts therein referred to includible 

under such paragraph as personal holding company income.

(5) CONSTRUCTIVE OWNERSHIP AS ACTUAL OWNERSHIP.—Stock 

constructively owned by a person by reason of the application of paragraph 

(1) or (3) shall, for purposes of applying paragraph (1) or (2), be treated as 

actually owned by such person; but stock constructively owned by an 

individual by reason of the application of paragraph (2) shall not be treated as 

owned by him for purposes of again applying such paragraph in order to 

make another the constructive owner of such stock.

(6) OPTION RULE IN LIEU OF FAMILY AND PARTNERSHIP RULE.—If stock may 

be considered as owned by an individual under either paragraph (2) or (3) it 

shall be considered as owned by him under paragraph (3).

(b) CONVERTIBLE SECURITIES.—Outstanding securities convertible into stock 

(whether or not convertible during the taxable year) shall be considered as 

outstanding stock—

(1) for purposes of the stock ownership requirement provided in section 

542 (a) (2), but only if the effect of the inclusion of all such securities is to 

make the corporation a personal holding company;

(2) for purposes of section 543 (a) (7) (relating to personal service 

contracts), but only if the effect of the inclusion of all such securities is to 

make the amounts therein referred to includible under such paragraph as 

personal holding company income;

(3) for purposes of section 543 (a) (6) (relating to the use of property by 

shareholders), but only if the effect of the inclusion of all such securities is to 

make the amounts therein referred to includible under such paragraph as 

personal holding company income; and

(4) for purposes of section 543 (a) (4) (relating to copyright royalties), but 

only if the effect of the inclusion of all such securities is to make the amounts 

therein referred to includible under such paragraph as personal holding 

company income.

The requirement in paragraphs (1), (2), (3), and (4) that all convertible securities 

must be included if any are to be included shall be subject to the exception that, 

where some of the outstanding securities are convertible only after a later date 

than in the case of others, the class having the earlier conversion date may be 

included although the others are not included, but no convertible securities shall 

be included unless all outstanding securities having a prior conversion date are 

also included.

Liquidation of certain corporations.—Section 333 (g) provides special rules 

with respect to the liquidation of a corporation which for at least one of the two 

most recent taxable years ending before February 26, 1964, was not a personal 

holding company under section 542, but would have been a personal holding 

company under section 542 for such taxable year if the law applicable for the 

first taxable year beginning after December 31, 1963, had been applicable to 

such taxable year. For liquidations occurring before January 1, 1967, see section 

333 (g) (1).

association within the meaning of section 7701 (a) (19) without 

regard to subparagraphs (D) and (E) thereof:
Detach pages 5 and 6 before filing

SPECIFIC INSTRUCTIONS

The following instructions are numbered to correspond with line numbers on page 1 of this schedule 

1. Taxable income before net operating loss deduction and special 

deductions, Form 1120.—Enter here the amount shown on line 28, page 1, 

Form 1120, computed in accordance 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 on line 1 includes any amount with respect to 

coal or domestic iron ore royalties to which section 631 (c) is applicable, see 

section 631 (c) and the regulations thereunder.

In the case of a nonresident foreign corporation (not engaged in trade or 

business 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). 

3. Expenses and depreciation applicable to property of the taxpayer in excess 

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 of the expenses and depreciation over the rent 

or other compensation shown therein should be entered on line 3, page 1. 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 received, that none was obtainable; that the property 

was held in the course of a business carried on bona fide for profit; and either 

that there was reasonable expectation that the operation of the property would 

result in a profit, or that the property was necessary to the conduct of the 

business.

The burden of proof will rest upon the taxpayer to sustain the deduction of 

the aggregate of the expenses and depreciation allowed in excess of the rent or 

other compensation derived from the property. A corporation claiming such 

excess deductions shall, in lieu of filling in Schedule A, attach to the return a 

statement setting forth its claim for allowance of the deductions together with a 

complete statement of facts, circumstances, and arguments on which it relies in 

support of the deductions. Such statement shall show:

(a) A description of the property;

(b) The cost or other basis to the corporation and the nature and value of the 

consideration paid for the property;

(c) The name and address of the person from whom the property was 

acquired and the date thereof;

(d) The name and address of the person to whom the property was leased or 

rented, or the person permitted to use the property, and the number of shares of 

stock, if any, held by such person and the members of his family;

(e) The nature (cash, securities, services, etc.) and gross amount of the rent or 

other compensation received or accrued for the use of, or the right to use, the 

property during the taxable year and for each of the 5 preceding years and the 

amount of the expenses incurred with respect to, and the depreciation sustained 

on, the property for such years;

(f) Evidence that the rent or other compensation was the highest obtainable 

and if none was received or accrued, a statement of the reasons therefor;

(g) A copy of the contract, lease, or rental agreement; 

(h) The purpose for which the property was used;

(i) The business carried on by the corporation with respect to which the 

property was held and the gross income, expenses, and net income derived from 

the conduct of such business for the taxable year and for each of the 5 preceding 

years;

7. 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) provides that there shall be allowed as a deduction from 

taxable income Federal income and excess profits taxes accrued during the 

(k) Any other information on which the corporation relies.

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

satisfied or released.—The sum of the amounts deducted from taxable income 

under section 545 (b) (9) with respect to any lien in favor of the United States 

must be added to taxable income, in computing undistributed personal holding 

company 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 to taxable income, the 

shareholders of the corporation may, pursuant to regulations prescribed by the 

Secretary or his delegate, elect to compute the income tax with respect to such 

dividends as are attributable to such amount as though they were received 

ratably over the period the lien was in effect. See Specific Instruction 14.

taxable year or deemed to be paid by a domestic corporation under section 902 

(a) (1) or 960 (a) (1) (C) for the taxable year, but not including the accumulated 

earnings tax imposed by section 531, the personal holding company tax imposed 

by section 541, or the taxes imposed by corresponding sections of a prior income 

tax law. However, a taxpayer shall deduct Federal income and excess profits 

taxes under this paragraph when paid if for each taxable year in which it was 

subject to tax imposed by section 500 of the Internal Revenue Code of 1939 it 

deducted such taxes when paid, unless it elects, in its return for a taxable year 

ending after June 30, 1954, to deduct the taxes described in this paragraph when 

accrued, in which case only taxes accrued may be deducted. Such an election 

shall be irrevocable and shall apply to the taxable year for which the election is 

made and all subsequent taxable years.

The credit allowed to domestic corporations by section 901 for income, war 

profits, and excess profits taxes of foreign countries and United States 

possessions is not allowed as a credit with respect to the personal holding 

company tax. There shall be allowed as a deduction from taxable income, 

however, the income, war profits, and excess profits taxes accrued during the 

taxable year to foreign countries and possessions of the United States if the 

taxpayer claims a credit for such taxes in computing its income tax.

Foreign corporations should treat such taxes as deductions to be allocated 

in accordance with section 861 in computing income from sources within the 

United States, and in such cases taxes of this nature will be reflected in taxable income stated on line 1 instead of being stated separately as a deduction on 

line 7.

8. Contributions or gifts deductible under section 545 (b) (2).—For purposes of 

the personal holding company tax, section 545 (b) (2) provides for a different 

limitation on deductions for charitable contributions than the 5 percent limitation 

for purposes of determining the corporate tax. The limitations on charitable 

deductions of individuals are applicable but are to be applied to the amount of 

taxable income to which the 5 percent limitation applied. (See Specific 

Instruction 19, Form 1120.) However, a further adjustment for this purpose is 

that the taxable income shall also be computed without the deduction of the 

amount disallowed under section 545 (b) (8) (relating to expenses and 

depreciation applicable to property of the taxpayer).

Page 5

For purposes of the personal holding company tax, the contribution carryover 

under the provisions of section 170 (b) (2) and 170 (b) (5) are not allowed 

(section 545 (b) (2) of the Code).

9. 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 allowed the amount of the net operating 

loss (as defined in section 172 (c)) for the preceding taxable year computed 

without the deductions provided in Part VIII (except organizational expenses, 

section 248) of subchapter B.

12. Amounts used or irrevocably set aside to pay or retire indebtedness of 

any kind incurred prior to January 1, 1934.—Enter the total amount reflected in 

line 7, Schedule C. Section 545 (b) (7) provides that in determining 

undistributed personal holding company income there shall be allowed as a 

deduction amounts used or irrevocably set aside to pay or retire indebtedness of 

any kind incurred before January 1, 1934, if such amounts are reasonable with 

reference to the size and terms of such indebtedness.

14. 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 (a) (1), (2), or (3) ) to which the taxpayer is subject at the close 

of the taxable year. However, the

13. Amounts used or irrevocably set aside to pay or retire qualified 

indebtedness (section 545 (c)).—Enter the total amount shown on line 5, 

Schedule D-1. Subject to the limitations described in section 545 (c), section 545 

(c) (1) provides that in determining undistributed personal holding company 

income there shall be allowed as a deduction 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)). Section 545 (c) (2) states that this deduction shall be 

applicable only with respect to a corporation—

(A) which for at least one of the two most recent taxable years ending 

before February 26, 1964, was not a personal holding company under 

section 542 but would have been a personal holding company under section 

542 for such taxable year if the law applicable for the furst taxable year 

beginning after December 31, 1963, had been applicable to such taxable 

year, or

(B) to the extent that it succeeds to the deduction referred to in section 

545 (c) (1) by reason of section 381 (c) (15).

(j) A statement of any reasons which existed for expectation that the 

operation of the property would be profitable, or a statement of the necessity for 

the use of the property in the business of the corporation, and the reasons why 

the property was acquired; and

Any corporation that claims a deduction for amounts used or irrevocably set 

aside to pay or retire qualified indebtedness must submit detailed information 

and any necessary computation showing that it is a corporation described in 

paragraph (A) above, or to the extent that it succeeds to such deduction by 

reason of section 381 (c) (15), it must submit detailed information showing that 

the distributor or transferor corporation was a corporation described in paragraph 

A above.
SPECIFIC INSTRUCTIONS—Continued

For purposes of determining the deduction for dividends paid to be entered 

on line 15, the rules provided in section 562 (relating to rules applicable in 

determining dividends eligible for dividends-paid deduction) shall be applicable 

regardless of whether or not the corporation liquidates before January 1, 1966.

(4) If there is an excess of such deduction for dividends paid over such 

taxable income for the second preceding taxable year, such excess shall be 

reduced by the amount determined in paragraph (5), and the remainder of such 

excess shall be allowed as a dividend carryover to the taxable year.

18. Dividends paid after close of taxable year (excluding deficiency dividends 

as defined in section 547 (d)).—Enter or line 18 and not in Schedule B, the 

amount of the dividends paid after the close of the taxable year and before the 

15th day of the third month thereafter, if the taxpayer elects in its return for the 

taxable year to have such dividends considered as paid during such taxable year. 

The amount allowed as a dividend under this paragraph with respect to any 

taxable year shall not exceed either the undistributed personal holding company 

income of the corporation for the taxable year, computed without regard to the 

dividends paid pursuant to this paragraph (line 17 of page 1 of this Schedule) or 

10 percent of the sum of the dividends paid during the taxable year, computed 

without regard to this paragraph (i. e., 10 percent of line 1, Schedule B). (See 

section 563.)

Neither line 15 nor line 18 should include “deficiency dividends.” The term 

“deficiency dividends” means in general only those dividends which are paid by 

a corporation pursuant to a specific procedure set forth in section 547, which 

includes a requirement that there must first be a determination by a court, by 

closing agreement, or (under regulations) a written agreement signed by the 

District Director and by or on behalf of the taxpayer relating to the liability of 

the corporation for personal holding company tax.

Schedule required under section 6501 (f).—Section 6501 (f) provides as 

follows:

(f) Personal Holding Company Tax.—If a corporation which is a personal 

holding company for any taxable year fails to file with its return under chapter 1 

for such year a schedule setting forth—

(1) the items of gross income and adjusted ordinary gross income, 

described in section 543, received by the corporation during such year, and

(2) the names and addresses of the individuals who owned, within the 

meaning of section 544 (relating to rules for determining stock ownership), at 

any time during the last half of such year more than 50 percent in value of the 

outstanding capital stock of the corporation,

the personal holding company tax for such year may be assessed, or a 

proceeding in court for the collection of such tax may be begun without 

assessment, at any time within 6 years after the return for such year was filed.

U. S. GOVERNMENT PRINTING OFFICE : 1964—O—723-555

Page 6

15. Deduction for dividends paid.—Enter the amount of the dividends-paid 

deduction as computed in Schedule B. 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.

amount deducted may not exceed taxable income as adjusted under sections 545 

(b) and 545 (c), computed without regard to this deduction. Thus the amount to 

be entered on line 14 shall not exceed line 6 less the total of lines 7 through 13, 

inclusive.

In general, a consent dividend is not an actual corporate distribution but is a 

hypothetical distribution evidenced by shareholders consents to treat as a 

dividend an amount which would constitute a dividend if distributed in money to 

such shareholders on the last day of the taxable year of such corporation. Such 

consent dividend may be availed of only if the person filing such consent owns 

common stock (or participating preferred stock, the participating rights of which 

are unlimited), and the amount specified in the consent is pro rata, with no 

preference to any share of stock as compared with other shares of the same class, 

and with no preference to one class of stock as compared with another class 

except to the extent that the former is entitled to such preference. The effect of 

the consent is that the amount of the consent dividend is treated both as a 

dividend and as a contribution to the capital of the corporation by the 

shareholder on the last day of the taxable year of the corporation. A consent 

shall be filed in duplicate on Form 972 at any time but not later than the due date 

of the corporation's income tax return for the taxable year for which credit is 

claimed. In addition, Form 973 must be filed by the taxpayer corporation. 

The dividend carryover to a taxable year shall be determined as follows: 

(1) For each of the 2 preceding taxable years there shall be determined the 

taxable income computed with the adjustments provided in section 545 (relating 

to the computation of undistributed personal holding company income) (whether 

or not the taxpayer was a personal holding company for either of such preceding 

taxable years), and there shall also be determined for each such year the 

deduction for dividends paid during such year as provided in section 561 (but 

determined without regard to the dividend carryover to such year).

(2) There shall be determined for each such taxable year whether there is an 

excess of such taxable income over such deduction for dividends paid or an 

excess of such deduction for dividends paid over such taxable income, and the 

amount of each such excess.

(3) If there is an excess of such deductions for dividends paid over such 

taxable income for the first preceding taxable year, such excess shall be allowed 

as a dividend carryover to the taxable year.

(5) The amount of the reduction specified in paragraph (4) shall be the 

amount of the excess of the taxable income, if any, for the first preceding taxable 

year over such deduction for dividends paid, if any, for the first preceding 

taxable year.