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“reasonable needs” of the corporation’s business generally is
determinative as to whether the corporation accumulated earnings
for the prohibited purpose of avoiding the Federal income tax
with respect to its shareholders. Sec. 533(a) and (b).
A corporation held to be a mere holding company or to have
accumulated earnings and profits in excess of the reasonable
needs of its business nevertheless may avoid imposition of the
accumulated earnings tax if it is established that the
corporation was not formed or availed of for the prohibited
purpose of avoiding the Federal income tax with respect to its
shareholders. Sec. 1.533-1(a)(2), Income Tax Regs.
Mere Holding Company
For purposes of the accumulated earnings tax, whether a
corporation’s activities constitute sufficient activities to
avoid classification as a mere holding company turns upon the
facts and circumstances of each case. Dahlem Found., Inc. v.
Commissioner, 54 T.C. 1566, 1574 (1970) (citing Beim Co. v.
Landy, 113 F.2d 897, 900 (8th Cir. 1940)). The burden of proof
as to whether a corporation constitutes a mere holding company is
placed on the corporation and may not be shifted under section
534. See Rule 142(a); H.C. Cockrell Warehouse Corp. v.
Commissioner, 71 T.C. 1036, 1045-1046 (1979).5
5 It appears that with certain limitations a shift in the
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