- 42 -
Commissioner, 50 T.C. at 330; Bardahl Manufacturing Corp. v.
Commissioner, supra.
The fact that a corporation accumulated earnings and profits
beyond the reasonable needs of the business is determinative of
the purpose to avoid income tax with respect to its shareholders,
unless the corporation proves the contrary by a preponderance of
the evidence. Sec. 533(a). This presumption cannot be rebutted
merely by evidence that tax avoidance was not the exclusive,
primary or dominant motive for the accumulations: to escape
liability for the accumulated earnings tax the corporation must
prove that tax avoidance was not one of the purposes.
United States v. Donruss Co., 393 U.S. 297 (1969). Cases in
which unreasonable accumulations have been fully explained by
legitimate corporate considerations are few. See, e.g.,
Bremerton Sun Publishing Co. v. Commissioner, 44 T.C. 566 (1965).
Viewing the record as a whole, we find that petitioner had a
general policy of retaining its earnings. As petitioner’s
president confirmed when asked whether the company was setting
aside funds or whether she herself made a decision to set aside
funds for any purpose during the years at issue: “It was not a
conscious decision. We knew always that you had to have funds
for anything that you would want to expand, or build, or do
renovations.” By routinely retaining earnings, whether or not an
identifiable need for a specific amount existed at the time,
petitioner’s management assured themselves that, as she put it,
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