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Either party may, pursuant to Rule 142(e), move the Court to
fix the burden of proof, pursuant to section 534, on the issue of
the reasonableness of petitioner's accumulations. Respondent has
so moved, and petitioner has filed a response to that motion.
The Court concludes that it is appropriate to decide the instant
motion prior to trial. Rutter v. Commissioner, 81 T.C. 937, 939
(1983); Chatham Corp. v. Commissioner, 48 T.C. 145, 146 (1967).
Sections 531 and 532 impose an accumulated earnings tax on
any corporation that is availed of for the purpose of avoiding
income tax with respect to its shareholders by permitting
earnings and profits to accumulate beyond the reasonable needs of
its business. Section 533(a) provides that, unless the
corporation proves to the contrary by the preponderance of the
evidence, the fact that earnings and profits are permitted to
accumulate beyond the reasonable needs of the business shall be
determinative of the purpose to avoid the income tax with respect
to shareholders.
Petitioner contends that it does not owe any accumulated
earnings tax because its reasonably anticipated business needs
exceeded its accumulated earnings and profits. The primary issue
in any trial of the merits of the instant case will be the
reasonableness of petitioner's claimed business needs. If those
needs exceed petitioner's accumulated taxable income (after
adjustments pursuant to section 535(b)), petitioner will owe no
accumulated earnings tax. Secs. 531, 535(a). If, however, those
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