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Whether a corporation has permitted its earnings and profits
to accumulate beyond the reasonable needs of its business
constitutes a question of fact, and we generally defer to the
determinations of the reasonable business needs that were made by
corporate officers and directors, unless the facts and
circumstances require us to substitute our business judgment for
theirs.6 Snow Manufacturing Co. v. Commissioner, 86 T.C. 260,
269 (1986) (citing Atl. Prop., Inc. v. Commissioner, 62 T.C. 644,
656 (1974), affd. 519 F.2d 1233 (1st Cir. 1975); Faber Cement
Block Co. v. Commissioner, 50 T.C. 317, 329 (1968)).
In order to classify retained earnings as accumulations for
reasonable business needs, a corporation is required to have
specific, definite, and feasible plans for using the retained
earnings. Sec. 1.537-1(b)(1), Income Tax Regs. The plans for
use of retained earnings that will be treated as reasonable are
those that project use of the earnings within a reasonable time
period viewed in light of all of the facts and circumstances.
Id. It is not necessary that plans for the use of retained
earnings be set forth in formal minutes, but evidence of a
definitive plan coupled with action taken toward the realization
thereof are expected. See Doug-Long, Inc. v. Commissioner, 72
6 Under the procedures outlined in sec. 534, the burden of
proof regarding whether petitioner accumulated earnings and
profits beyond the reasonable needs of its business has been
placed on respondent.
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