5
1996, respondent sent a notice of deficiency to petitioner. In
it, respondent determined that petitioner had deficiencies in
income tax (including accumulated earnings tax) of $100,548 for
FY 1992, $68,286 for FY 1993, and $50,678 for FY 1994.
Respondent determined that petitioner had accumulated taxable
income of $289,736 in FY 1992, $205,937 in FY 1993, and $160,203
in FY 1994.
Respondent determined petitioner's accumulated earnings4 as
of the close of the prior year as follows:
9/30/92 9/30/93 9/30/94
Accrual basis $1,149,031 $1,230,404 $1,197,598
Accounts receivable (985,378) (852,526) (655,925)
Tax refund receivable (16,474) (42,197)
Accounts payable 1,818 2,080 1,676
Deferred taxes 117,643 67,687 7,684
Income taxes payable 56,867
Cash basis 339,981 431,171 508,836
Respondent computed petitioner's accumulated earnings
credit5 in the notice of deficiency as follows:
4 A corporation's accumulated earnings are the earnings it
accumulates rather than distributes. See United States v.
Donruss Co., 393 U.S. 297, 303 (1969).
5 The accumulated earnings credit is generally the amount of
(continued...)
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