- 50 - the business does so with the purpose of avoiding income tax with respect to its shareholders. The presumption can be rebutted by a preponderance of evidence to the contrary. Sec. 533(a); Snow Manufacturing Co. v. Commissioner, supra at 269. Therefore, the accumulated earnings tax does not apply if a corporation has allowed an unreasonable accumulation but lacks the proscribed purpose or intent. Technalysis Corp. v. Commissioner, supra at 403; Pelton Steel Casting Co. v. Commissioner, 28 T.C. 153, 173 (1957), affd. 251 F.2d 278 (7th Cir. 1958). However, it has been recognized that without the presumption provided in section 533(a), the accumulated earnings tax would largely, as a practical matter, be unenforceable. Ivan Allen Co. v. United States, supra at 628. Section 1.533-1(a)(2), Income Tax Regs., sets forth factors to be considered in determining whether a corporation had the proscribed purpose. Some of the relevant factors are: (1) Dealings between the corporation and its shareholders for the personal benefit of the shareholders; for example, personal loans; (2) corporate investment of undistributed assets in unrelated businesses or investments; and (3) the corporation's dividend history. Section 535(a) defines "accumulated taxable income" (the recomputed taxable income of the corporation against which tax under section 531 is imposed) as the taxable income of the corporation, as adjusted in section 535(b), less the dividend-Page: Previous 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 Next
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