- 15 -
statutory notice of deficiency included an amount with respect to
the accumulated earnings tax imposed by section 531 for 1995,
1996, and 1997. Petitioner, in accordance with section 534(c),
timely submitted a statement setting forth the grounds upon which
it relied to establish that all or part of its retained earnings
for the years in issue have not been permitted to accumulate
beyond the reasonable needs of its business.
The grounds relied upon by petitioner in its statement were
as follows:
1. Liquidity. The company was not as highly liquid as
other companies that have been found to have unreasonably
accumulated earnings.
2. Investment in Assets Unrelated to Business. The company
held low earning, highly liquid investments unrelated to its
business in order to pay for its future business needs and
contingent liabilities.
3. Redemption of Stock of Dissenting Stockholders. The
company faced the contingent need to redeem the stock of the
dissenting Pedigo family stockholders.
4. Class Action Lawsuit. The company faced the contingent
liability for damages as a defendant in a class action lawsuit.
5. Business Expansion Plans. The company had definite,
substantial business plans to expand its business.
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011