11) Morgan Company's outstanding stock was owned as follows: (a) Alice Morgan owned 35%, (b) Alice's spouse, Brent, owned 5%, (c) Alice's sister, Marcia, owned 2%, (d) Alice's mother, Bretta, owned 8%, (e) Alice's daughter, Lilly, owned 1%, and (f) an unrelated partnership owned 49%.
Morgan reported the following during 2013:
Rental Income $ 750,000
Dividend Income (10% owned corporation) 200,000
Tax-exempt Ohio Bond Interest Income 40,000
Gross Profit from Sales 50,000
Long-term capital Gain 200,000
Total Gross Income $1,240,000
Less:
Rental Expenses:
Mortgage interest $140,000
Depreciation 150,000
Real estate taxes 175,000
Other rental expenses 165,000 ( 630,000)
Less:
G&A expenses ( 90,000)
Net Profit $ 520,000
During the year, Morgan paid $50,000 in aggregate dividends to its stockholders.
Is Morgan a personal holding company under the Internal Revenue Code? Explain why or why not.