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Internal Revenue Code · 26 U.S.C.

§ 269A. Personal service corporations formed or availed of to avoid or evade income tax

In force Text current through Public Law 119-121 (October 9, 2026) release point 119-121

Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).

Cite as 26 U.S.C. § 269A

At a glance

Read from the text, the source credit and the official notes. Not part of the law.

Status
In force
Added
September 3, 1982 by Pub. L. 97–248
Last amended
October 22, 1986 by Pub. L. 99–514
Amendments
1 dated changes in the source credit
Length
2 subsections · 276 words · about 1 min to read
Defines
2 terms
Cross-references
cites 2; cited by 6 Code sections and 2 other regulations
(a) General rule If—
(1) substantially all of the services of a personal service corporation are performed for (or on behalf of) 1 other corporation, partnership, or other entity, and
(2) the principal purpose for forming, or availing of, such personal service corporation is the avoidance or evasion of Federal income tax by reducing the income of, or securing the benefit of any expense, deduction, credit, exclusion, or other allowance for, any employee-owner which would not otherwise be available,
then the Secretary may allocate all income, deductions, credits, exclusions, and other allowances between such personal service corporation and its employee-owners, if such allocation is necessary to prevent avoidance or evasion of Federal income tax or clearly to reflect the income of the personal service corporation or any of its employee-owners.
(b) Definitions For purposes of this section—
(1) Personal service corporation

The term “personal service corporation” means a corporation the principal activity of which is the performance of personal services and such services are substantially performed by employee-owners.

(2) Employee-owner

The term “employee-owner” means any employee who owns, on any day during the taxable year, more than 10 percent of the outstanding stock of the personal service corporation. For purposes of the preceding sentence, section 318 shall apply, except that “5 percent” shall be substituted for “50 percent” in section 318(a)(2)(C).

(3) Related persons

All related persons (within the meaning of section 144(a)(3)) shall be treated as 1 entity.

(Added Pub. L. 97–248, title II, § 250(a), Sept. 3, 1982, 96 Stat. 528; amended Pub. L. 99–514, title XIII, § 1301(j)(4), Oct. 22, 1986, 100 Stat. 2657.)

Terms defined here

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Cross-references

Computed from the citations in the text of Title 26 and 26 CFR.

This section cites 2 other sections

Cited by 6 Code sections

Cited in 2 regulations not issued under it

Amendment history

From the source credit and the official notes, newest first.

  1. Amended by Pub. L. 99–514Parts changed in 1986: (b)(3)
  2. Added by Pub. L. 97–248

Where it sits in the Code

  1. Subtitle A Income Taxes
  2. Chapter 1 NORMAL TAXES AND SURTAXES
  3. Subchapter B Computation of Taxable Income
  4. Part IX ITEMS NOT DEDUCTIBLE

Nearby sections

Official notes

Show the Law Revision Counsel's notes (amendments, effective dates)

Editorial Notes

Amendments

1986—Subsec. (b)(3). Pub. L. 99–514 substituted “section 144(a)(3)” for “section 103(b)(6)(C)”.

Statutory Notes and Related Subsidiaries

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to bonds issued after Aug. 15, 1986, except as otherwise provided, see sections 1311 to 1318 of Pub. L. 99–514, set out as an Effective Date; Transitional Rules note under section 141 of this title.

Effective Date

Pub. L. 97–248, title II, § 250(c), Sept. 3, 1982, 96 Stat. 529, provided that: “The amendments made by this section [enacting this section] shall apply to taxable years beginning after December 31, 1982.”