- 56 - NITCO's Net Liquid Assets Petitioners contend that NITCO's accumulated earnings and profits are "irrelevant" and that only NITCO's net liquid assets should be considered in connection with NITCO's reasonable business needs and its liability for accumulated earnings tax during the years in issue. They argue that the accumulated earnings tax is directed at "economic reality" and that this relevant economic reality (NITCO's dividend-paying capacity) is to be determined solely by examining NITCO's available net liquid assets. Respondent, on the other hand, asserts that NITCO's true dividend-paying capacity is not accurately reflected by NITCO's remaining net liquid assets, because of NITCO's substantial expenditures, during 1987 through 1989, for the personal benefit of Mr. Mussman's family. We agree with respondent. We have no quarrel with, and the case law completely supports, the proposition that where a corporation's net liquid assets have been invested in nonliquid, business-related assets, the corporation has appropriately diminished its dividend-paying capacity for accumulated earnings tax purposes. In such instances, the corporation's accumulated earnings have been applied to meet its reasonable business needs. However, this is not the same situation that we are presented with in the instant cases.Page: Previous 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 Next
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