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petitioner may avoid interest and grow from within, solid banking
and supplier relationships, and controlled expansion and
improvement in a risky business. Petitioner does not borrow
money and has not done so since 1965. Petitioner's policy is to
finance current and future needs from within.
In its statement, petitioner asserts that it has not
permitted its earnings and profits to accumulate beyond the
reasonable needs of its business. Petitioner argues, to the
contrary, that its accumulated earnings and profits are
inadequate to meet its future business requirements. Petitioner
states that it reasonably accumulated $23,002,264 in taxable year
1991, $23,257,978 in taxable year 1992, and $24,218,583 in
taxable year 1993. We address individually each of the ten
grounds asserted by petitioner as reasonable business needs.
Respondent has made no concessions as to any grounds.
1. Working Capital Needs
In its statement, petitioner sets forth working capital
needs of its business as a ground that it reasonably accumulated
$7,418,264 in taxable year 1991, $7,673,978 in taxable year 1992,
and $8,634,583 in taxable year 1993. Petitioner calculated such
needs using the average business cycle method developed in
Bardahl Manufacturing Corp. v. Commissioner, T.C. Memo. 1965-200
(the Bardahl formula).
Respondent argues that petitioner used an unconventional
method of computing the Bardahl formula and that petitioner's
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