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these cases are distinguishable from those in Exacto Spring Corp.
v. Commissioner 196 F.3d 333 (7th Cir. 1999).
Respondent points out that the compensated officer of Exacto
Spring Corp. (Exacto), a fine wire and spring manufacturer, was a
technical expert who was integrally involved in development of
the automated machinery that was one of the reasons for Exacto’s
financial success. In addition, the compensated officer in
Exacto was responsible for the solicitation of 60 percent to 70
percent of Exacto’s sales. By contrast, the Valentes’ services
to petitioner were, with the exception of the purchase and sale
of assets during the years under consideration, essentially to
maintain and collect petitioner’s established and passive sources
of revenue. Considering the fact that venue for any appeal of
this case would be the Court of Appeals for the Ninth Circuit,
see Golsen v. Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d
985 (10th Cir. (1971), and the fact that petitioner failed to
meet the independent investor test, we do not find it appropriate
to rely solely on the independent investor test to reach our
findings and/or holding.
II. Whether Petitioner Permitted Its 1995 Earnings To Accumulate
Beyond the Reasonable Needs of the Business--Section 531
Section 531 imposes an additional 39.6-percent tax on
accumulated taxable income. Under section 535, accumulated
taxable income is adjusted taxable income less a dividends paid
deduction and the accumulated earnings credit. For corporations,
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