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deficiency to petitioner. The accumulated earnings tax issue
was the primary adjustment determined by respondent. Respondent
determined that petitioner had accumulated excess taxable income
of $116,291 in 1987, $76,275 in 1988, and $143,917 in 1989 that
was taxable under section 531.
On October 23, 1991, petitioner submitted a statement under
section 534(c) detailing its plans to expand its oil, gas, film,
and television businesses. Petitioner attached copies of
corporate minutes to verify the amounts of accumulated earnings
needed for each of petitioner's expansion programs. Petitioner
also stated that it needed a reserve for contingent liabilities
from an NFC Oil Co. lawsuit settled in 1988, environmental
liabilities including plugging oil wells, and breach of contract
and copyright violations. Petitioner attached copies of
corporate minutes to verify the amounts it needed for these
reserves.
On November 27, 1991, petitioner filed the petition in this
case. In it, petitioner denied that it was subject to the
accumulated earnings tax and referred to the section 534(c)
statement it filed in which it stated its needs to accumulate
earnings.
Respondent filed the answer on January 27, 1992, and an
amended answer on February 24, 1992. Respondent alleged that
petitioner's section 534(c) statement was not sufficient.
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