§531 Imposition of accumulated earnings tax

OVERRULED Metro Leasing & Development Corp., East Bay Chevrolet Company, A Corp., Petitioner 119 T.C. No. 2 · 2002

574 (1945), was effectively overruled by United States v.

DIST. Wells Fargo and Company, and Subsidiaries, Successor in Interest to Intrawest Financial Corporation and Subsidiaries; f.k.a. Norwest Corporation and Subsidiaries, Successor in Interest to Intrawest Financial Corporation and Subsidiaries, Petitioners 111 T.C. No. 5 · 1998

Gottesman is inapposite.

Wells Fargo and Company, and Subsidiaries; Successor in Interest to United Banks of Colorado, Inc., and Subsidiaries, f.k.a. Norwest Corporation and Subsidiaries, Successor in Interest to United Banks of Colorado, Inc., and Subsidiaries, Petitioners 111 T.C. No. 5 · 1998

In Gottesman, this Court held that, since the consolidated return regulations did not mandate a consolidated calculation of the accumulated earnings tax under section 531, the taxpayer was permitted to use a separate company calculation.

Wells Fargo and Company, Successor in Interest to United Banks of Colorado, Inc., and Subsidiaries; f.k.a. Norwest Corporation, Successor in Interest toUnited Banks of Colorado, Inc., and Subsidiaries, Petitioners 111 T.C. No. 5 · 1998

In Gottesman, this Court held that, since the consolidated return regulations did not mandate a consolidated calculation of the accumulated earnings tax under section 531, the taxpayer was permitted to use a separate company calculation.

Zeeman Manufacturing Company, Inc. and Subsidiaries, Petitioner T.C. Memo. 1997-322 · 1997

deficiency and in accordance with section 534(b), respondent issued to petitioner a Notice of Intent to Assert Accumulated Earnings Tax stating that respondent intended to issue a notice of deficiency for the tax on accumulated earnings pursuant to section 531. Petitioner submitted a timely statement pursuant to section 534(c). Subsequently, respondent issued a notice of deficiency in which respondent determined, inter alia, that petitioner is liable for the accumulated earnings tax pursuant to

Gustafson's Dairy, Inc., Petitioner T.C. Memo. 1997-519 · 1997

notice of deficiency in this case, respondent notified petitioner that respondent proposed to issue a notice of deficiency for fiscal years 1987, 1988, and 1989 including a determination that petitioner is liable for accumulated earnings tax under section 531. Petitioner submitted a timely statement under section 534(c) stating the grounds on which it relied to establish that it had not accumulated earnings beyond the reasonable needs of its business. In this statement, petitioner alleged that

Windsor Production Corporation, Petitioner T.C. Memo. 1995-556 · 1995

. Petitioner's underlying case was decided at Saltzman v. Commissioner, T.C. Memo. 1994-641. Several consolidated cases were decided by that opinion. The primary issue involving petitioner was whether it was liable for accumulated earnings tax under section 531. 1(...continued) effect for the years in issue. Rule references are to the Tax Court Rules of Practice and Procedure. - 3 - Petitioner's shareholders and board of directors met on December 1, 1987. The minutes of that meeting show that pe

3M Company and Subsidiaries, Petitioner 160 T.C. No. 3 · 2023

But as we have recently made clear, and as the Commissioner does not dispute, a regulation like the one here is legislative, not interpretative. See Green Valley, No. 17379-19, 159 T.C., slip op. at 8–15. Put simply, Treasury erroneously assumed the regulations were interpretative. That assumption colored its view of its responsibilities u

Marvel Entertainment, LLC, as Successor to Marvel Entertainment, Inc., f.k.a. Marvel Enterprises, Inc. and as agent for members of Marvel Enterprises, Inc. and Subsidiaries Group, Petitioners · 2015

In Gottesman the issue was whether the regulations promulgated by the Secretary under section 1502 required accumulated taxable income for section 531 purposes to be calculated on a separate company basis or on a consolidated basis.

Applied Research Associates, Inc. and Affiliate, Petitioners · 2014

ply, the aggregate ofthe taxes imposed by section 541 on the separate undistributed personal holding company income ofthe members ofthe group which are personal holding companies; (d) Ifparagraph (b) ofthis section does not apply, the tax imposed by section 531 on the consolidated accumulatedtaxable income (see §1.1502-43); (e) The tax imposed by section 594(a) in lieu ofthe taxes imposed by section 11 or 1201 on the taxable income ofa life insurance department ofthe common parent ofa group whic

Applied Research Associates, Inc. & Affiliate v. Commissioner 143 T.C. 310 · 2014

the aggregate of the taxes imposed by section 541 on the separate undistributed personal holding company income of the members of the group which are personal holding companies; (d) If paragraph (b) of this section does not apply, the tax imposed by section 531 on the consolidated accumulated taxable income (see §1.1502-43); (e) The tax imposed by section 594(a) in lieu of the taxes imposed by section 11 or 1201 on the taxable income of a life insurance department of the common parent of a group

Beiner, Inc., Petitioner T.C. Memo. 2004-219 · 2004

eed for its operation 6 Given this concession, we conclude that sec. 7491(a), which in certain circumstances places the burden of proof upon the Commissioner, is not applicable here. - 23 - and had to expend to avoid the accumulated earnings tax of section 531. Respondent asserts that Beiner performed minimal, nonspecialized services for petitioner during each subject year and that those services did not entitle petitioner to deduct the disputed payments as compensation. Petitioner argues in its

Haffner's Service Stations, Inc., Petitioner T.C. Memo. 2002-38 · 2002

Section 531 imposes a penalty tax on the accumulated taxable income of a corporation that is availed of for the purpose of avoiding tax with respect to its shareholders by permitting earnings and profits (earnings) to accumulate instead of distributing them. Secs. 531 and 532(a). The purpose of the penalty tax is to compel the corporation to distri

Metro Leasing & Development Corp. v. Commissioner 119 T.C. 8 · 2002

Tax Liability on Installment Sale Income To Be Received in Years After 1995 Section 531 imposes a tax on a corporate taxpayer’s accumulated taxable income.

Knight Furniture Co., Inc., Petitioner T.C. Memo. 2001-19 · 2001

ailed of for the purpose of avoiding income tax with respect to - 2 - its shareholders, by permitting its earnings and profits to accumulate rather than to be divided and distributed, and was thus liable for the accumulated earnings tax imposed by section 531. Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. FINDINGS OF FACT Some of the facts have bee

Metro Leasing & Development, Corp. East Bay Chevrolet Company, A Corp., Petitioner T.C. Memo. 2001-119 · 2001

Whether Petitioner Permitted Its 1995 Earnings To Accumulate Beyond the Reasonable Needs of the Business--Section 531 Section 531 imposes an additional 39.6-percent tax on accumulated taxable income.

Thomas P. & Ermina A. Krukowski, Petitioner 114 T.C. No. 25 · 2000

In Gottesman & Co., we considered whether the taxpayer (the common parent of an - 49 - affiliated group) was required to compute “accumulated taxable income” (for purposes of the accumulated earnings tax, section 531) on a consolidated basis as the Commissioner contended, or on a separate-company basis as the taxpayer contended.

Krukowski v. Commissioner 114 T.C. 366 · 2000

In Gottesman & Co., we considered whether the taxpayer (the common parent of an affiliated group) was required to compute “accumulated taxable income” (for purposes of the accumulated earnings tax, section 531) on a consolidated basis as the Commissioner contended, or on a separate-company basis as the taxpayer contended.

California Marine Cleaning, Inc., Petitioner T.C. Memo. 1998-311 · 1998

On May 15, 1996, respondent notified petitioner, pursuant to section 534(b), that respondent intended to issue a notice of deficiency determining that petitioner is liable for the accumulated earnings tax under section 531 for FY 1992, 1993, and 1994.

Pulsar Components International, Inc., Petitioner T.C. Memo. 1996-129 · 1996

Companies Both petitioner and respondent rely on expert testimony with respect to this factor. Expert testimony is appropriate to help 7 Bearing in mind that respondent has not determined that petitioner is liable for the accumulated earnings tax of sec. 531, it is possible that she would agree that the large increase in petitioner's retained earnings was necessary for the reasonable needs of petitioner's business. - 27 - the Court understand an area requiring specialized training, knowledge, or

Robert G. Mussman and Estate of Myrtis Mussman, Deceased; Robert G. Mussman, Executor, Petitioners T.C. Memo. 1996-168 · 1996

yond the reasonable needs of the business during the years 1987, 1988, and 1989; (2) whether NITCO was availed of for the proscribed purpose of avoiding income tax with respect to its shareholders and is liable for the accumulated earnings tax under section 531,2 for 1987, 1988, and 1989; (3) whether NITCO, for 1987, 1988, and 1989, is entitled to business deductions for certain legal expenses it incurred and/or paid; (4) whether petitioner Robert G.

Eyefull Incorporated, Petitioner T.C. Memo. 1996-238 · 1996

Discussion Section 531 imposes a penalty tax on the accumulated taxable income of a corporation that is availed of for the purpose of avoiding tax with respect to its shareholders by permitting earnings and profits to accumulate instead of distributing them.

Northwestern Indiana Telephone Company, Petitioner T.C. Memo. 1996-168 · 1996

yond the reasonable needs of the business during the years 1987, 1988, and 1989; (2) whether NITCO was availed of for the proscribed purpose of avoiding income tax with respect to its shareholders and is liable for the accumulated earnings tax under section 531,2 for 1987, 1988, and 1989; (3) whether NITCO, for 1987, 1988, and 1989, is entitled to business deductions for certain legal expenses it incurred and/or paid; (4) whether petitioner Robert G.

Doug-Long, Inc. v. Commissioner 72 T.C. 158 · 1979

8,387.70 29,869.56 Due to concessions, the issues for decision are whether petitioner, who owned and operated a “truck stop,” is liable for the accumulated earnings tax imposed by section 531 for 1972,1973, and 1974, and if so, the extent of such liability.

Norwest Corp. v. Commissioner 111 T.C. 105 · 1998

Gottesman & Co. v. Commissioner 77 T.C. 1149 · 1981

Dahlem Foundation, Inc. v. Commissioner 54 T.C. 1566 · 1970

Doug-Long, Inc. v. Commissioner 73 T.C. 71 · 1979

Estate of Lucas v. Commissioner 71 T.C. 838 · 1979

Atlantic Properties, Inc. v. Commissioner 62 T.C. 644 · 1974

Montgomery Co. v. Commissioner 54 T.C. 986 · 1970

Novelart Manufacturing Co. v. Commissioner 52 T.C. 794 · 1969

Anthony Sanders v. County of Ventura 87 F.4th 434 · Cir.

Technalysis Corp. v. Commissioner 101 T.C. 397 · 1993

Myco Industries, Inc. v. Commissioner 98 T.C. 270 · 1992

Hughes, Inc. v. Commissioner 90 T.C. 1 · 1988

Chambers v. Commissioner 87 T.C. 225 · 1986

Snow Manufacturing Co. v. Commissioner 86 T.C. 260 · 1986

Church of Scientology v. Commissioner 83 T.C. 381 · 1984

Michael DiPeppino, Inc. v. Commissioner 83 T.C. 979 · 1984

Chaney & Hope, Inc. v. Commissioner 80 T.C. 263 · 1983

Thompson Engineering Co. v. Commissioner 80 T.C. 672 · 1983

Mariani Frozen Foods, Inc. v. Commissioner 81 T.C. 448 · 1983

Rutter v. Commissioner 81 T.C. 937 · 1983

Eades v. Commissioner 79 T.C. 985 · 1982

Zuanich v. Commissioner 77 T.C. 428 · 1981

Eller v. Commissioner 77 T.C. 934 · 1981

Manson Western Corp. v. Commissioner 76 T.C. 1161 · 1981

Brountas v. Commissioner 73 T.C. 491 · 1979

LaMastro v. Commissioner 72 T.C. 377 · 1979

American Financial Corp. v. Commissioner 72 T.C. 506 · 1979

H. C. Cockrell Warehouse Corp. v. Commissioner 71 T.C. 1036 · 1979

Capital Sales, Inc. v. Commissioner 71 T.C. 416 · 1978

Atlas Tool Co. v. Commissioner 70 T.C. 86 · 1978

Knott v. Commissioner 67 T.C. 681 · 1977

Benjamin v. Commissioner 66 T.C. 1084 · 1976

Ready Paving & Construction Co. v. Commissioner 61 T.C. 826 · 1974

GPD, Inc. v. Commissioner 60 T.C. 480 · 1973

Your Host, Inc. v. Commissioner 58 T.C. 10 · 1972

Golconda Mining Corp. v. Commissioner 58 T.C. 139 · 1972

Dielectric Materials Co. v. Commissioner 57 T.C. 587 · 1972

Callan v. Commissioner 54 T.C. 1514 · 1970

Magic Mart, Inc. v. Commissioner 51 T.C. 775 · 1969

Faber Cement Block Co. v. Commissioner 50 T.C. 317 · 1968

Hollenbeck v. Commissioner 50 T.C. 740 · 1968

Chatham Corp. v. Commissioner 48 T.C. 145 · 1967

Rhombar Co. v. Commissioner 47 T.C. 75 · 1966

Simpson v. Commissioner 43 T.C. 900 · 1965

John P. Scripps Newspapers v. Commissioner 44 T.C. 453 · 1965

Bremerton Sun Publishing Co. v. Commissioner 44 T.C. 566 · 1965

Sandy Estate Co. v. Commissioner 43 T.C. 361 · 1964

Sperapani v. Commissioner 42 T.C. 308 · 1964

Moffatt v. Commissioner 42 T.C. 558 · 1964

Factories Investment Corp. v. Commissioner 39 T.C. 908 · 1963

Electric Regulator Corp. v. Commissioner 40 T.C. 757 · 1963

Nemours Corp. v. Commissioner 38 T.C. 585 · 1962

James M. Pierce Corp. v. Commissioner 38 T.C. 643 · 1962

R. Gsell & Co. v. Commissioner 34 T.C. 41 · 1960

American Metal Products Corp. v. Commissioner 34 T.C. 89 · 1960

I. A. Dress Co. v. Commissioner 32 T.C. 93 · 1959

Raymond I. Smith, Inc. v. Commissioner 33 T.C. 141 · 1959

Wellman Operating Corp. v. Commissioner 33 T.C. 162 · 1959

Kerr-Cochran, Inc. v. Commissioner 30 T.C. 69 · 1958

Pelton Steel Casting Co. v. Commissioner 28 T.C. 153 · 1957

Haffner's Service Stations, Inc. v. Commissioner 326 F.3d 1 · Cir.

United States v. Ronald White, Jr. 863 F.3d 784 · Cir.

United States v. Timothy Ward 972 F.3d 364 · Cir.

VanDerStok v. Garland 86 F.4th 179 · Cir.

§531 — Imposition of accumulated earnings tax

88 Citing Cases