- 41 -
needed. But we need not determine this. We need only determine
whether petitioner has adequately explained the excess of its net
liquid assets as of the close of TYE 8/31/92 over the amount it
would have required for working capital. This excess was
approximately $45,000 (see Appendix Table 2). Since the required
downpayment alone would have exceeded this amount, we are
satisfied that petitioner did not allow its earnings to
accumulate beyond the reasonable needs of its business in this
year.
Conclusions
Table 2 in the Appendix sets forth the calculations
supporting our conclusion that petitioner allowed its earnings to
accumulate beyond the reasonable needs of its business for the
first 3 of the 4 taxable years at issue. The underlying
methodology is well established in the case law and requires no
elaboration. See Snow Manufacturing Co. v. Commissioner, 86 T.C.
at 280-282; Alma Piston Co. v. Commissioner, T.C. Memo. 1976-107,
affd. 579 F.2d 1000 (6th Cir. 1978); Bardahl Manufacturing Corp.
v. Commissioner, T.C. Memo. 1965-200; Grob, Inc. v. United
States, 565 F. Supp. 391 (E.D. Wis. 1983). For purposes of
comparing petitioner’s reasonable needs with the net liquid
assets available to meet those needs, the loans made to
affiliates for purposes that had no relation to petitioner’s
business are treated as liquid assets. Faber Cement Block Co. v.
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