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yup definitely a personal holding company and the interest would deifintely be PHC income. More work to do to figure this out.
The only neat way to take it out of PHC land is to spread the ownership in a way that is not possible for me or to have income other than PHC income (which would indeed make a NV corp unwarranted (don't agree with you on the NV corp otherwise -- interest is intangible and fleeting; can easily be sourced in and from different state legally -- until I find a case that says otherwise at least ;} )).

The things that I find most interesting are that the ownership limit is measured only in the latter half of the year and that the ownership quantification is expressed in terms of individuals (which includes trusts and qualified plans, but not corps expressly -- Query whether adding another corp (ca this time as it would be incvolved in an active trade in CA and not a PHC) to the ownership of the nevada corp solves the problem. If the Ca Corp owned 50% of the NV corp, my current hypothesis is no PHC at all (but a whole host of other issues to consider). I will research it somemore, but would welcome any more thoughts -- yours have been very helpful thus far as you hit the central issue. thanks.

PS: you are deifintely right on the double tax too: Corp pays on its own income, then Taxpayer must report his share of any retained PHC income on his own tax return as though it was a paid out dividened so you end up with at least a 30% tax -- which is still miniscully (sp?) better but not worth the trouble.
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