-35-
1960), affg. 31 T.C. 415 (1958), for the proposition that the
taxpayer must assume that it will continue to be profitable in
analyzing its business needs at the end of each year, or to count
future revenues as a source for financing those needs.
Respondent's reliance on Dixie, Inc. v. Commissioner, supra, is
misplaced. The U.S. Court of Appeals for the Second Circuit
noted in passing that the taxpayer had not considered future
earnings as one of several factors showing that the taxpayer did
not formulate a specific and definite plan for which accumulating
earnings would have been reasonable. Id.
2. Factors Identified in Treasury Regulations
Treasury regulations list the following as examples of
factors to consider in determining whether a corporation was
formed or availed of to avoid income tax of its shareholders:
(a) Dealings between the corporation and its shareholders for the
personal benefit of the shareholders, such as personal loans; (b)
corporate investment of undistributed assets in unrelated
businesses or investments; and (c) the corporation's dividend
history. Sec. 1.533-1(a)(2), Income Tax Regs. We next consider
how those factors apply here.
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