Northwestern Indiana Telephone Company - Page 52

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                  plans for the use of such accumulation.  Such an                                     
                  accumulation need not be used immediately, nor must the                              
                  plans for its use be consummated within a short period                               
                  after the close of the taxable year, provided that such                              
                  accumulation will be used within a reasonable time                                   
                  depending upon all the facts and circumstances relating                              
                  to the future needs of the business.  Where the future                               
                  needs of the business are uncertain or vague, where the                              
                  plans for the future use of an accumulation are not                                  
                  specific, definite, and feasible, or where the                                       
                  execution of such a plan is postponed indefinitely, an                               
                  accumulation cannot be justified on the grounds of                                   
                  reasonably anticipated needs of the business.                                        
                        (2) Consideration shall be given to reasonably                                 
                  anticipated needs as they exist on the basis of the                                  
                  facts at the close of the taxable year.  Thus,                                       
                  subsequent events shall not be used for the purpose of                               
                  showing that the retention of earnings or profits was                                
                  unreasonable at the close of the taxable year if all                                 
                  the elements of reasonable anticipation are present at                               
                  the close of such taxable year.  However, subsequent                                 
                  events may be considered to determine whether the                                    
                  taxpayer actually intended to consummate or has                                      
                  actually consummated the plans for which the earnings                                
                  and profits were accumulated.  * * *                                                 

                  Upon determining the amount necessary to satisfy the                                 
            "reasonable needs of the business", we shall not simply compare                            
            this amount with the corporation's total accumulated earnings and                          
            profits, but shall examine the amount of accumulated earnings and                          
            profits that is reflected in business-related assets or in idle                            
            net liquid assets of the corporation.  Ivan Allen Co. v. United                            
            States, supra at 628; Smoot Sand & Gravel Corp. v. Commissioner,                           
            274 F.2d 495, 501 (4th Cir. 1960), affg. T.C. Memo. 1958-221.  In                          
            other words, we must consider whether the corporation's                                    
            accumulated earnings and profits have been translated into assets                          
            related to the business, so as to have been employed to meet the                           




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Last modified: May 25, 2011