- 29 -
In order for a corporation to justify an
accumulation of earnings and profits for reasonably
anticipated future needs, there must be an indication
that the future needs of the business require such
accumulation, and the corporation must have specific,
definite, and feasible plans for the use of such
accumulation. Such an accumulation need not be used
immediately, nor must the plans for its use be
consummated within a short period after the close of
the taxable year, provided that such accumulation will
be used within a reasonable time depending upon all the
facts and circumstances relating to the future needs of
the business. Where the future needs of the business
are uncertain or vague, where the plans for the future
use of an accumulation are not specific, definite, and
feasible, or where the execution of such a plan is
postponed indefinitely, an accumulation cannot be
justified, on the grounds of reasonably anticipated
needs of the business.
The requirement of a “specific, definite, and feasible” plan
does not demand that a taxpayer produce meticulously drawn,
formal blueprints for action. See Faber Cement Block Co. v.
Commissioner, 50 T.C. 317, 332 (1968); John P. Scripps Newspapers
v. Commissioner, 44 T.C. 453, 469 (1965). A corporation,
however, cannot immunize itself from the accumulated earnings tax
merely by referring to expansion in its corporate minutes. See
Faber Cement Block Co. v. Commissioner, supra at 332.
Definiteness of a plan coupled with action taken towards its
consummation are essential to justify an accumulation as
reasonable. See Snow Manufacturing Co. v. Commissioner, 86 T.C.
260, 274 (1986) (citing Dixie, Inc. v. Commissioner, 277 F.2d
526, 528 (2d Cir. 1960), affg. 31 T.C. 415 (1958)).
The record indicates that during the years in issue
petitioner considered a number of different properties. However,
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 NextLast modified: May 25, 2011