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TITLE 26-INTERNAL REVENUE CODE (1) Stock not owned by individual Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being owned propor- tionately by its shareholders, partners, or beneficiaries. (2) Family and partnership ownership An individual shall be considered as owning the stock owned, directly or indirectly, by or for his family or by or for his partner. For purposes of this paragraph, the family of an individual includes only his brothers and sis- ters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. (3) Options If any person has an option to acquire stock, such stock shall be considered as owned by such person. For purposes of this para- graph, an option to acquire such an option, and each one of a series of such options, shall be considered as an option to acquire such stock. (4) Application of family-partnership and option rules Paragraphs (2) and (3) shall be applied- (A) for purposes of the stock ownership requirement provided in section 552(a)(2), if, but only if, the effect is to make the cor- poration a foreign personal holding compa- ny; (B) for purposes of section 553(a)(5) (re- lating to personal service contracts) or of section 553(a)(6) (relating to the use of property by shareholders), if, but only if, the effect is to make the amounts therein referred to includible under such paragraph as foreign personal holding company income. (5) Constructive ownership as actual ownership Stock constructively owned by a person by reason of the application of paragraph (1) or (3) shall, for purposes of applying paragraph (1) or (2), be treated as actually owned by such person; but stock constructively owned by an individual by reason of the application of paragraph (2) shall not be treated as owned by him for purposes of again applying such paragraph in order to make another the constructive owner of such stock. (6) Option rule in lieu of family and partnership rule If stock may be considered as owned by an individual under either paragraph (2) or (3) it shall be considered as owned by him under paragraph (3). (b) Convertible securities Outstanding securities convertible into stock (whether or not convertible during the taxable year) shall be considered as outstanding stock- (1) for purposes of the stock ownership re- quirement provided in section 552(a)(2), but only if the effect of the inclusion of all such securities is to make the corporation a foreign personal holding company; (2) for purposes of section 553(a)(5) (relat- ing to personal service contracts), but only if the effect of the inclusion of all such securi- ties is to make the amounts therein referred to includible under such paragraph as foreign personal holding company income; and (3) for purposes of section 553(a)(6) (relat- ing to the use of property by shareholders), but only if the effect of the inclusion of all such securities is to make the amounts there- in referred to includible under such para- graph as foreign personal holding company income. The requirement in paragraphs (1), (2), and (3) that all convertible securities must be included if any are to be included shall be subject to the exception that, where some of the outstanding securities are convertible only after a later date than in the case of others, the class having the earlier conversion date may be included al- though the others are not included, but no con- vertible securities shall be included unless all outstanding securities having a prior conversion date are also included. (Aug. 16, 1954, ch. 736, 68A Stat. 196; Feb. 26, 1964, Pub. L. 88-272, title II, § 225(e), 78 Stat. 86.) AMEDMEmTS 1964-Pub. L. 88-272 amended section generally by designating existing provisions as subsec. (a), and sub- stituting pars. (1) to (6) therein and subsec. (b), for provisions which incorporated by reference substan- tially the same provisions as in such pars. (1) to (6) and subsec. (b). Ec aivE DATE OF 1964 AMEmMENT Amendment by Pub. L. 88-272 applicable to taxable years beginning after Dec. 31, 1963, see section 225(l)(1) of Pub. L. 88-272 set out as an Effective Date of 1964 Amendment note under section 316 of this title. CRoss REFERENcEs Liquidations before Jan. 1, 1966, see section 225(h) of Pub. L. 88-272, set out as a note under section 333 of this title. § 555. Gross income of foreign personal holding com- panies (a) General rule For purposes of this part, the term "gross income" means, with respect to a foreign corpo- ration, gross income computed (without regard to the provisions of subehapter N (see. 861 and following)) as if the foreign corporation were a domestic corporation which is a personal hold- ing company. (b) Additions to gross income In the case of a foreign personal holding com- pany (whether or not a United States group, as defined in section 552(a)(2), existed with re- spect to such company on the last day of its taxable year) which was a shareholder in an- other foreign personal holding company on the day in the taxable year of the second company which was the last day on which a United States group existed with respect to the second company, there shall be included, as a dividend, in the gross income of the first company, for the taxable year in which or with which the taxable year of the second company ends, the amount the first company would have received as a dividend if on such last day there had been distributed by the second company, and re- ceived by the shareholders, an amount which bears the same ratio to the undistributed for- eign personal holding company income of the § 555 Page 424