- 58 -
Corp. v. Commissioner, 274 F.2d at 501. In other words, rather
than being positive evidence demonstrating that NITCO's earnings
were, in fact, accumulated to meet its reasonable business needs,
these expenditures indicate NITCO's earnings were accumulated for
the proscribed purpose of avoiding income tax with respect to its
shareholders. See sec. 1.533-1(a)(2), Income Tax Regs. To
accept petitioners' contention would be tantamount to holding
that the accumulated earnings tax could be avoided by making
nonbusiness expenditures to benefit a shareholder or
shareholder's family.
NITCO's Reasonable Business Needs
The parties have stipulated, and we have so found, what
NITCO's working capital requirements were during the years in
issue. In addition to these working capital requirements,
petitioners contend that a number of other reasonably anticipated
business needs of NITCO justified NITCO's accumulation of
earnings during the years in issue.12
12Petitioners contend that NITCO's "reasonably anticipated
business needs" during the years in issue were as follows:
Business Need 1987 1988 1989
Working capital $75,569 $278,646 $190,312
Retirement of long- 557,505 170,760 -0-
term debt
Plant modernization:
Fiber to the exchange 1,000,000 same same
(continued...)
Page: Previous 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 NextLast modified: May 25, 2011