@028 CHAP 8

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         ³         CLOSELY-HELD C CORPORATIONS         ³
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A "closely-held C corporation" is a regular corporation
that is owned by only one person or controlled (over 50% of
its stock) by five or fewer individuals.  Elaborate "attri-
bution" rules apply so that a person is considered to al-
so own shares that are owned by certain related persons,
such as children, other controlled corporations, etc.

Thus, if you have 9 children, you can't give them each 10%
of the stock of a corporation, keep the other 10% for your-
self and say that no five persons owns over 50% of the com-
pany -- The attribution rules will deem you to be the owner
of 100% of the stock in such case, and the corporation will
be considered a closely-held C corporation (unless it el-
ects to be an S corporation).

The primary disadvantage of having a corporation be treated
as a closely-held C corporation is that it may not offset
"passive activity" losses against portfolio income (such as
dividends and interest income).  However, unlike an indi-
vidual, such a corporation IS allowed to offset passive
losses against its "net active income" (unless it also hap-
pens to be considered a "personal service corporation").  C
corporations that are neither "closely-held C corporations"
nor "personal service corporations" are not subject to the
passive loss restrictions at all, and thus are allowed to
offset passive losses fully against all kinds of income.

@IF117xx]NOTE:  @NAME is a C corporation.
@IF117xx]
@IF110xx]It also appears, from the information you have provided,
@IF110xx]that your company is a "closely-held C corporation," as de-
@IF110xx]scribed above, which may thus be unable to fully utilize
@IF110xx]any "passive activity" losses.
@IF112xx]However, it appears that it would not be considered a "close-
@IF112xx]ly-held C corporation," based on the fact that no 5 or fewer
@IF112xx]individuals directly (or indirectly) own more than 50% of
@IF112xx]the stock of @NAME.