[Code of Federal Regulations]
[Title 26, Volume 7]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.552-3]

[Page 286-287]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.552-3  Stock ownership requirement.

    (a) To meet the stock ownership requirement, it is necessary that at 
some

[[Page 287]]

time in the taxable year more than 50 percent in value of the 
outstanding stock of the foreign corporation be owned, directly or 
indirectly, by or for not more than five individuals who are citizens or 
residents of the United States, herein referred to as United States 
group. For the purpose of the requirement under section 552(a)(2), 
section 554 provides that the ownership of the stock must be determined 
under the rules prescribed by section 544 (relating to rules for 
determining stock ownership in the case of personal holding companies 
generally). Accordingly, section 544 and Sec. Sec. 1.544-1 through 
1.544-7 are applicable for purposes of section 552(a)(2) and this 
section as if each reference in section 544 and Sec. Sec. 1.544-1 
through 1.544-7 to a personal holding company or to part II (section 541 
and following), subchapter G, chapter 1 of the Code, was a reference to 
a foreign personal holding company or to part III (section 551 and 
following), subchapter G, chapter 1 of the Code, as the case may be.
    (b) It is necessary to consider any change in the stock outstanding 
during the taxable year, whether in the number of shares or classes of 
stock, or in the ownership thereof, since a corporation comes within the 
classification if the statutory conditions with respect to stock 
ownership are present at any time during the taxable year.
    (c) In determining whether the statutory conditions with respect to 
stock ownership are present at any time during the taxable year, the 
phrase in value shall, in the light of all the circumstances, be deemed 
the value of the corporate stock outstanding at such time (not including 
treasury stock). This value may be determined upon the basis of the 
company's net worth, earning and dividend paying capacity, appreciation 
of assets, together with such other factors as have a bearing upon the 
value of the stock. If the value of the stock which is used is greatly 
at variance with that reflected by the corporate books, the evidence of 
such value should be filed with the return. In any case where there are 
two or more classes of stock outstanding, the total value of all the 
stock should be allocated among the different classes according to the 
relative value of each class therein.