§537 — Reasonable needs of the business

28 cases·6 followed·1 criticized·21 cited—21% support

Statute Text — 26 U.S.C. §537

(a)General rule

For purposes of this part, the term “reasonable needs of the business” includes—

(1)

the reasonably anticipated needs of the business,

(2)

the section 303 redemption needs of the business, and

(3)

the excess business holdings redemption needs of the business.

(b)Special rules

For purposes of subsection (a)—

(1)Section 303 redemption needs

The term “section 303 redemption needs” means, with respect to the taxable year of the corporation in which a shareholder of the corporation died or any taxable year thereafter, the amount needed (or reasonably anticipated to be needed) to make a redemption of stock included in the gross estate of the decedent (but not in excess of the maximum amount of stock to which section 303(a) may apply).

(2)Excess business holdings redemption needs

The term “excess business holdings redemption needs” means the amount needed (or reasonably anticipated to be needed) to redeem from a private foundation stock which—

(A)

such foundation held on

May 26, 1969

(or which was received by such foundation pursuant to a will or irrevocable trust to which section 4943(c)(5) applies), and

(B)

constituted excess business holdings on

May 26, 1969

, or would have constituted excess business holdings as of such date if there were taken into account (i) stock received pursuant to a will or trust described in subparagraph (A), and (ii) the reduction in the total outstanding stock of the corporation which would have resulted solely from the redemption of stock held by the private foundation.

(3)Obligations incurred to make redemptions

In applying paragraphs (1) and (2), the discharge of any obligation incurred to make a redemption described in such paragraphs shall be treated as the making of such redemption.

(4)Product liability loss reserves

The accumulation of reasonable amounts for the payment of reasonably anticipated product liability losses (as defined in section 172(f) (as in effect before the date of enactment of the Tax Cuts and Jobs Act)), as determined under regulations prescribed by the Secretary, shall be treated as accumulated for the reasonably anticipated needs of the business.

(5)No inference as to prior taxable years

The application of this part to any taxable year before the first taxable year specified in paragraph (1) shall be made without regard to the fact that distributions in redemption coming within the terms of such paragraphs were subsequently made.

Treasury Regulations

Treas. Reg. §Treas. Reg. §1.537-1 Reasonable needs of the business
Treas. Reg. §Treas. Reg. §1.537-1(a) In general.
Treas. Reg. §Treas. Reg. §1.537-1(b) Reasonable anticipated needs.
Treas. Reg. §Treas. Reg. §1.537-1(c) Section 303 redemption needs of the business.
Treas. Reg. §Treas. Reg. §1.537-1(d) Excess business holdings redemption needs.
Treas. Reg. §Treas. Reg. §1.537-1(e) §1.537-1(e)
Treas. Reg. §Treas. Reg. §1.537-1(f) Product liability loss reserves.
Treas. Reg. §Treas. Reg. §1.537-1(i) §1.537-1(i)
Treas. Reg. §Treas. Reg. §1.537-2 Grounds for accumulation of earnings and profits
Treas. Reg. §Treas. Reg. §1.537-2(a) In general.
Treas. Reg. §Treas. Reg. §1.537-2(b) Reasonable accumulation of earnings and profits.
Treas. Reg. §Treas. Reg. §1.537-2(c) Unreasonable accumulations of earnings and profits.
Treas. Reg. §Treas. Reg. §1.537-3 Business of the corporation
Treas. Reg. §Treas. Reg. §1.537-3(a) The business of a corporation is not merely that which it has previously carried on but includes, in general, any line of business which it may undertake.
Treas. Reg. §Treas. Reg. §1.537-3(b) If one corporation owns the stock of another corporation and, in effect, operates the other corporation, the business of the latter corporation may be considered in substance, although not in legal form, the business of the first corporation.

28 Citing Cases

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

Court, cert. denied 354 U.S. 922 (1957). 1. Specific Needs In this case, petitioner has set forth five specific needs, in addition to its need for working capital, which petitioner contends were reasonable needs of its business within the meaning of section 537. Respondent, on the other hand, contends (1) that petitioner lacked specific, definite, and feasible plans for its accumulated earnings and profits, and (2) that if petitioner had plans, its business needs were less than petitioner claims

Patients Mutual Assistance Collective Corporation d.b.a. Harborside Health Center, Petitioner · 2018

s "to prevent * * * [States that permit medical-marijuana use] from implementing their own laws that authorize the use, distribution, possession, or - 17 - cultivation ofmedical marijuana." Consolidated Appropriations Act, 2017, Pub. L. No. 115-31, sec. 537, 131 Stat. at 228; see also Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, sec. 542, 129 Stat. at 2332-33 (2015); Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. No. 113- 235, sec. 538, 128 Stat. at 2217 (20

Patients Mutual Assistance Collective Corporation d.b.a. Harborside Health Center, Petitioner · 2018

Patients Mutual Assistance CollectiveCorporation d.b.a. Harborside Health Center, Petitioner · 2018

David C. Roark and Estate of Irene Roark, Deceased; David C. Roark, Executor, Petitioners T.C. Memo. 2004-271 · 2004

all of the accelerated payments, NCF’s $489,000 interest would disappear. NCF faced similar problems with the other split-dollar 6 The legislation passed, and can now be found in section 170(f)(10). Tax Relief Extension Act of 1999, Pub. L. 106-170, sec. 537, 113 Stat. 1936. Parts of it were indeed made retroactive to Feb. 8, 1999, the date of introduction. - 10 - agreements it had made, so it began sending letters to all its contributors encouraging them to terminate their policies. If a contri

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

537; Technalysis Corp. v. Commissioner, 101 T.C. 397, 409 (1993). If the facts disclosed in the statement are sufficiently substantial, material, definite, and clear to permit respondent to prepare for trial, the statement will be deemed sufficient as to such grounds. J.H. Rutter Rex Manufacturing Co. v. Commissioner, 853 F.2d 1275, 1283 (5th

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

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

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

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

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

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

Berry Petroleum Co. v. Commissioner 104 T.C. 584 · 1995

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

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

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

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

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

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

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

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

Apollo Industries, Inc. v. Commissioner 44 T.C. 1 · 1965

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

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

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

Estate of Paul v. Commissioner 16 T.C. 743 · 1951

Rexing Quality Eggs v. Rembrandt Enterprises, Inc. · Cir.

LHC Nashua Partnership, Ltd. v. PDNED Sagamore Nashua, L.L.C. 659 F.3d 450 · Cir.

§537 — Reasonable needs of the business

28 Citing Cases

New cases, delivered.