Simple English definitions for legal terms
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A personal-holding-company tax is a type of tax that is imposed on a company that mainly holds investments and does not have active business operations. This tax is meant to discourage individuals from using a company to avoid paying personal income tax. Taxes are charges imposed by the government on people, businesses, transactions, or property to generate public revenue. They can take many forms and are used to support government operations and public needs.
A personal-holding-company tax is a type of tax that is imposed on a holding company. A holding company is a company that owns other companies' stocks, bonds, or assets. The personal-holding-company tax is imposed on the company's undistributed income, which is the income that the company has earned but has not distributed to its shareholders as dividends.
These examples illustrate how the personal-holding-company tax is imposed on the undistributed income of a holding company. If a holding company retains its earnings to avoid paying income tax, it may be subject to this penalty tax.