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TYE 8/31/88, $702,000 in TYE 8/31/90, and $306,000 in TYE
8/31/91.
Discussion
Section 531 imposes a penalty tax on the accumulated taxable
income of a corporation that is availed of for the purpose of
avoiding tax with respect to its shareholders by permitting
earnings and profits to accumulate instead of distributing them.
Secs. 531, 532(a). The fact that earnings and profits have
accumulated beyond the reasonable needs of the business
establishes a presumption that tax avoidance was a purpose of the
accumulation. Sec. 533(a). The reasonable needs of the business
include reasonably anticipated future needs. Sec. 1.537-1(a),
Income Tax Regs. In order to justify an accumulation for
reasonably anticipated future needs, in general, the corporation
must demonstrate a need warranting such accumulation and the
existence, as of the end of the relevant taxable year, of
specific, definite, and feasible plans to use the accumulation
within a reasonable time to meet this need. Sec. 1.537-1(b),
Income Tax Regs. In recognition of the informality which
commonly characterizes planning within a closely held
corporation, neither the regulations nor the cases require
meticulously drawn formal blueprints for action. Faber Cement
Block Co. v. Commissioner, 50 T.C. 317, 332 (1968); Bremerton Sun
Publishing Co. v. Commissioner, 44 T.C. 566, 584-585 (1965). But
where such documentation is lacking, the intention to dedicate
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