- 47 -
the business. See Myco Indus., Inc. v. Commissioner, T.C. Memo.
1992-147.
Petitioner argues that respondent bears the burden of proof
in all years by virtue of the December 16, 1996, letter.
Respondent concedes that he bears the burden of proof for 1992,
with respect to whether petitioner allowed its earnings to
accumulate beyond the reasonable needs of the business, but
argues that petitioner bears the burden of proof for the
remaining years. We agree with neither side in full. We hold
that respondent bears the burden of proof as to the grounds set
forth in the December 16, 1996, letter on which petitioner relies
to establish that its accumulation of earnings did not exceed the
reasonable needs of its business. We hold that petitioner
continues to bear the burden of proof with respect to any
additional grounds that it alleges were the reason for the
accumulation, as well as with respect to the ultimate question of
whether petitioner was availed of for a tax-motivated purpose.16
Pelton Steel Casting Co. v. Commissioner, 28 T.C. 153, 183-184
(1957), affd. 251 F.2d 278 (7th Cir. 1958); see also Wellman
Operating Corp. v. Commissioner, 33 T.C. 162, 182 (1959).
We read the December 16, 1996, letter to have alerted
respondent that petitioner was asserting that it had accumulated
earnings during the subject years for a planned stock redemption
16 Notwithstanding our holdings as to which party bears the
burden of proof on this issue, none of our holdings as to the
related substantive issue hinges on the burden of proof.
Page: Previous 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 NextLast modified: May 25, 2011