Can you give me plain English definitions for the following: (1) a closely held corporation and (2) a personal service corporation?
Generally, a closely held corporation is a corporation that, in the last half of the tax year, has more than 50% of the value of its outstanding stock owned (directly or indirectly) by 5 or fewer individuals. Generally, closely held corporations are subject to additional limitations in the tax treatment of items such as passive activity losses, at-risk rules, and compensation paid to a corporate officers. A personal service corporation is a corporation where the main work of the company is to perform services in the fields of health, law, engineering, architecture, accounting, actuarial science, the performing arts, or consulting. Examples are law firms and medical clinics. Also, most all of the stock is owned by employees, retired employees, or their estates.
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