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17 T.C. 1404, 1414 (1952). Courts should be hesitant to
substitute their judgment and attribute a tax-avoidance motive
unless the facts and circumstances clearly warrant the conclusion
that the accumulation of earnings and profits was unreasonable
and for the proscribed purpose. See Snow Manufacturing Co. v.
Commissioner, supra at 269; Atlantic Properties, Inc. v.
Commissioner, 62 T.C. 644, 656 (1974), affd. 519 F.2d 1233 (1st
Cir. 1975); Faber Cement Block Co. v. Commissioner, supra at 329;
John P. Scripps Newspapers v. Commissioner, supra at 468.
Whether a particular ground or grounds for the accumulation
of earnings and profits indicate that the earnings and profits
have been accumulated for the reasonable needs of the business or
beyond such needs is dependent upon the particular circumstances
of the case. Sec. 1.537-2(a), Income Tax Regs. Taking into
consideration the applicable burden of proof, we address each of
the grounds asserted by petitioner in justifying its accumulation
of earnings and profits for its reasonable business needs.
1. Working Capital Needs for Operating Cycle
Earnings retained to provide for working capital
requirements are accumulated for the reasonable needs of the
business. See sec. 1.537-2(b)(4), Income Tax Regs. The working
capital needs of a business are commonly evaluated by means of
the “Bardahl formula”. See Technalysis Corp. v. Commissioner,
101 T.C. 397, 407 (1993); Bardahl Manufacturing Corp. v.
Commissioner, T.C. Memo. 1965-200. The parties have separately
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