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Dividend History
At the suggestion of Bostwick, the board unanimously
approved an increase in cash dividends at the February 18, 1994,
board meeting. Petitioner’s taxable income, net book income, and
dividends paid for years 1995 through 1997 were as follows:
Total
Taxable Net Book Dividends Dividend
Year Income Income Paid Per Share
1995 $390,935 $258,938 $15,665 $10
1996 298,772 208,993 15,665 10
1997 248,978 174,718 14,285 10
Petitioner has a history of making regular, annual dividend
payments to its stockholders. Petitioner’s payments of
dividends, over the years in issue, averaged 5 percent and
7 percent of petitioner’s taxable and net book incomes,
respectively.
OPINION
As a result of the examination of the years in issue,
respondent determined that petitioner’s earnings and profits
exceeded the reasonable needs of its business. Respondent
determined that the accumulated earnings tax applied to
petitioner’s accumulated taxable income of $243,273, $193,328,
and $160,433 for 1995, 1996, and 1997, respectively, and
determined deficiencies of $94,876, $75,398, and $62,569 for
1995, 1996, and 1997, respectively.
Respondent, in accordance with section 534(b), sent to
petitioner a notification informing petitioner that a proposed
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