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Sec. 1.537-1(b), Income Tax Regs. In recognition of the
informality which commonly characterizes planning within a
closely held corporation, however, neither the regulations nor
the cases require meticulously drawn formal blueprints for
action. Faber Cement Block Co. v. Commissioner, 50 T.C. 317, 332
(1968); Bremerton Sun Publg. Co. v. Commissioner, 44 T.C. 566,
584-585 (1965). But where documentation is lacking, the
intention to dedicate corporate resources to identified business
needs must be unambiguously evidenced by some contemporaneous
course of action toward this end. Cheyenne Newspapers, Inc. v.
Commissioner, 494 F.2d 429, 433-434 (10th Cir. 1974), affg. T.C.
Memo. 1973-52; Snow Manufacturing Co. v. Commissioner, supra at
273-277; Ellwest Stereo Theatres, Inc. v. Commissioner, T.C.
Memo. 1995-610.
Section 534 lists two situations in which the Commissioner
bears the burden of proving that earnings have accumulated beyond
the reasonable needs of the business. First, the Commissioner
bears the burden of proof when the Commissioner fails to notify
the corporation before issuing a notice of deficiency to it that
the notice of deficiency includes an amount for the accumulated
earnings tax. Second, the Commissioner bears the burden of proof
when the corporation responds timely to the Commissioner’s
notification with a statement that explains the grounds, with
facts sufficient to show the basis thereof, on which it relies to
establish that the accumulation was for the reasonable needs of
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