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The fact that petitioner had a steady cash-flow from its
film rights, without more, does not provide a basis for
respondent's position that petitioner unreasonably accumulated
income. The fact that petitioner paid dividends and management
fees to Arnold Saltzman, without more, does not provide a basis
for respondent's position. Respondent does not state how much
petitioner paid to Arnold Saltzman, nor does respondent say how
an expense by a business shows that the business accumulated too
much. We conclude that the facts known to respondent do not
provide a reasonable basis in fact for respondent's position in
the notice of deficiency. After respondent issued the notice of
deficiency, petitioner filed its statement under section 534(c)
explaining its reasons to accumulate earnings. Respondent does
not claim to rely on different facts for the answer than those
upon which respondent relied in the notice of deficiency. We
conclude that the facts known to respondent do not provide a
reasonable basis for respondent's position.
c. Effect of Burden of Proof
Respondent claims to be substantially justified in
determining that petitioner is liable for the accumulated
earnings tax because petitioner has the burden of proof. We
disagree. The fact that petitioner bears the burden of proof
does not give respondent a basis in fact or establish that
respondent's position is substantially justified. Powers v.
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