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T.C. 158, 171 (1979). The test is whether the alleged plan
appears to have been “‘a real consideration during the taxable
year, and not simply an afterthought to justify challenged
accumulations.’” Faber Cement Block Co. v. Commissioner, supra
at 332-333 (quoting Smoot Sand & Gravel Corp. v. Commissioner,
274 F.2d 495, 499 (4th Cir. 1960), affg. T.C. Memo. 1958-221).
On this question, respondent’s arguments are well presented
and well briefed. Respondent argues primarily that petitioner
lacked definite and specific plans for the use of the $1.9
million and the $2.9 million in earnings that were retained as of
the end of the 1996 3-month and the 1997 9-month short taxable
years in issue. Further, respondent contends that had the above
retained earnings been distributed to petitioner from and through
ADCS-Limited, Holdings LLC, and Operating LLC, and then
distributed by petitioner as dividends to its shareholders, ADCS-
Limited’s $9.7 million in retained earnings from prior years
would have remained available for use in ADCS-Limited’s business
and would have been sufficient to meet petitioner’s and its
affiliate’s reasonable business needs.
Based on our analysis of the evidence and on our
understanding of the facts before us, however, we conclude that
ADCS-Limited’s and petitioner’s retention of the earnings in
question in the short taxable years before us was reasonable.
Petitioner’s management developed not exhaustive but
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