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with respect to petitioner’s retained earnings constituted the
reason such earnings were retained and not distributed.
On the credible evidence before us, even if petitioner were
regarded as a mere holding company for purposes of the
accumulated earnings tax, and even if petitioner were regarded as
having accumulated earnings beyond the reasonable needs of its
business, the evidence establishes that petitioner did not
accumulate its earnings during its 1996 and 1997 short taxable
years before us for the purpose of avoiding the Federal income
tax with respect to its shareholders.
We conclude that for the short taxable years in issue
petitioner did not permit its earnings and profits to accumulate
for the purpose of avoiding the Federal income tax with respect
to its shareholders. Petitioner is not subject to the
accumulated earnings tax for the years in issue.
Decision will be entered
for petitioner.
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