[Anonymous]

Hi Everyone, i have the Reg exam next week, any help to answer my question will be a great help!

here is the question,

Kee holding corp has eight unrelated equal stockholders. for the year ended dec 31, 2010, kee’s income comprised the following:

net rental income: $1000

Commissions earned on sales of franchises $3000

Dividends from taxable domestic corporations $90,000

Deductible expenses for 2010 totaled $10,000, kee paid no devidiends for the past three years. Kee’s liability for personal holding company for 2010 will be based on

a. $12,000

b.$11,000

c. $9,000

d.$0

Why is the answer D? the answer explained that Kee is not a PHC, but how i see it is, it passes both the stock ownership test (100%/8*5=62.5% , so 5 or fewer people owning more than 50% of the stock) and the income test (all incomes are passive, meeting at least 60% PHC income requirement) I don’t understand…. please advise Thanks!