- 5 -
Federal Income Taxation of Corporations and Shareholders, par.
7.08[2], at 7-31 (6th ed. 1994), the authors comment that a
section 534(c) statement:
must constitute more than mere notice of an intent to
prove the reasonableness of the accumulation. Rather,
the taxpayer must show its hand by stating clearly and
specifically the grounds on which it will rely to
quantify and prove reasonable business needs and by
setting out the facts (not the evidence but more than
conclusions of law) that, if proven, support the
alleged business needs for the accumulation.
[Gustafson's Dairy, Inc. v. Commissioner, T.C. Memo.
1995-11 (quoting substantially same passage in 5th ed.
(1987)); Hughes, Inc. v. Commissioner, 90 T.C. 1, 17
(1988) (substantially same language in 4th ed. (1979));
Rutter v. Commissioner, supra at 939 (same).]
Although the taxpayer's statement must reveal its litigation
theory to respondent, the statement must outline only the basic
2(...continued)
the notice of deficiency, respondent used the Bardahl calculation
that appeared in respondent's Notice of Intent to Assert
Accumulated Earnings Tax (Notice of Intent). After the Notice of
Intent was sent but before the notice of deficiency was sent,
respondent's agent agreed to certain corrections to the Bardahl
calculation. Accordingly, citing the Helvering v. Taylor, 293
U.S. 507, 515 (1935) line of cases, petitioner argues that the
notice of deficiency is excessive and erroneous and that,
therefore, respondent bears the burden of proof as to all matters
therein.
We disagree. In the instant case, for purposes of the
notice of deficiency, respondent used a Bardahl computation in
the determination of petitioner's tax liability. Generally, we
do not look behind a notice of deficiency to examine the evidence
used or the propriety of the Commissioner's motives,
administrative policies, or procedures involved in making the
determinations in the notice. Proesel v. Commissioner, 73 T.C.
600, 605 (1979); Greenberg's Express, Inc. v. Commissioner, 62
T.C. 324, 327 (1974). Accordingly, except to the limited extent
we decide otherwise herein, the burden of proof remains on
petitioner to prove that respondent's determinations are
erroneous. Rule 142(a).
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