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corporate taxpayers, in appropriate circumstances, are allowed to
take into account business activities of and to accumulate
earnings for the needs of business entities they control, even
though the taxpayer constitutes a separate legal entity.
Petitioner also argues that through general partnership
principles the business needs of a partnership may be attributed
to a corporate partner that controls the partnership.
We agree generally with petitioner. For accumulated
earnings tax purposes, respondent’s own regulations allow
corporations, depending on the facts and circumstances to treat
the business activities of affiliated entities as their own. See
sec. 1.537-3(b), Income Tax Regs.
Respondent cites to Turner v. Commissioner, T.C. Memo. 1965-
101, wherein it was found that a corporate taxpayer, for purposes
of the accumulated earnings tax, had unreasonably accumulated
earnings and profits for the needs of a partnership in which the
corporation owned a limited partnership interest. The basis for
the holding in this Memorandum Opinion appears to be that, as a
limited partner, the corporation had limited risk and liability
and therefore could not be called upon to pay any of the debts of
the partnership and therefore could not be forced to invest
additional funds in the limited partnership. In this regard, we
believe respondent reads too much into Turner. For accumulated
earnings tax purposes, in addition to what a corporation is
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