A personal holding company is similar to tax shelters for high bracketed taxpayers. It allows taxpayers to form corporations to shelter there income by paying lower taxes (corporate tax rates) instead of being subject to higher taxes. According to tax law a personal holding company has two requirements:
- Comprised of 5 or fewer individuals and it has to be owned by 50% or more by those individuals.
- Sixty percent of their gross income has to be from rent, interest, royalties & dividends.