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Business Need 1987 1988 1989
Working capital $75,569 $278,646 $190,312
Retirement of long-term 557,505 170,760 --
debt
Fiber optic to 300,000 100,000 100,000
the exchange
Petitioners have failed to establish that NITCO, during these
years, had reasonable business needs in excess of these amounts.
Rule 142(a).
NITCO's Liability for Accumulated Earnings Tax
For 1987, 1988, and 1989, NITCO's accumulated earnings and
adjusted net liquid assets exceeded the reasonable needs of the
business. NITCO is therefore presumed to have accumulated its
earnings with the purpose of avoiding income tax with respect to
its shareholders. Sec. 533(a).
NITCO has failed to rebut this presumption of proscribed
purpose. Sec. 533(a); Technalysis Corp. v. Commissioner, 101
T.C. at 403. Indeed, the record in the instant cases reflects
the existence of factors that strongly indicate NITCO had this
proscribed purpose. NITCO engaged in extensive nonbusiness-
related activities to benefit and support Mr. Mussman's two sons.
NITCO made investments that were unrelated to its business. From
1954 through 1994, NITCO never declared and paid a formal
dividend to its shareholders. See sec. 1.533-1(a)(2), Income Tax
Regs. We hold that NITCO, for 1987, 1988, and 1989, is liable
for accumulated earnings tax.
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