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6. Repairs and Renovations. The company had both
anticipated needs and made significant repairs and renovations to
its assets.
7. Dividend History. The company had a history of paying
regular dividends.
Petitioner’s statement provided varying degrees of detail as
to the different grounds. Petitioner filed a Motion to Shift
Burden of Proof to respondent. See Rule 142(e). We granted
petitioner’s Motion to Shift Burden of Proof as to grounds 3 and
5 set forth above.
The sole issue for decision is whether, for each of the
years in issue, petitioner was availed of for the purpose of
avoiding income tax with respect to its shareholders, within the
meaning of section 532, and was thus liable for the accumulated
earnings tax imposed by section 531.
The accumulated earnings tax is imposed on the accumulated
taxable income of every corporation formed or availed of for the
purpose of avoiding the income tax with respect to its
shareholders, by permitting earnings and profits to accumulate
instead of being divided or distributed. See secs. 531 and 532.
The purpose of the accumulated earnings tax is to compel the
company to distribute any profits not needed for the conduct of
its business so that individual stockholders will become liable
for taxes on the dividends received. See Ivan Allen Co. v.
United States, 422 U.S. 617, 626 (1975); United States v. Donruss
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