-39-
subsequent events may not be considered to show that an
accumulation was unreasonable if the taxpayer reasonably
anticipated the need at the end of the taxable year, but may be
considered to determine whether the corporation consummated or
intended to consummate the plan for which the earnings and
profits were accumulated. Id. At the start of the trial, the
parties agreed that the standard stated in section 1.537-1(b)(2),
Income Tax Regs., applies in deciding what is relevant to whether
petitioner's accumulation was reasonable.
We next consider whether petitioner had reasonable grounds
for its accumulation of earnings in the years in issue.
15(...continued)
(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. In this connection,
projected expansion or investment plans shall be
reviewed in the light of the facts during each year and
as they exist as of the close of the taxable year. If
a corporation has justified an accumulation for future
needs by plans never consummated, the amount of such an
accumulation shall be taken into account in determining
the reasonableness of subsequent accumulations.
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