Thompson Engineering Co. v. Commissioner
United States Tax Court
Petitioner, a construction subcontractor, needed to retain earnings and profits to assure adequate bonding capacity; also, it had a reasonable business need to expand its plant. Petitioner had outstanding loans to its sole shareholder; the balance of these loans increased during the years in issue.
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Petitioner, a construction subcontractor, needed to retain earnings and profits to assure adequate bonding capacity; also, it had a reasonable business need to expand its plant. Petitioner had outstanding loans to its sole shareholder; the balance of these loans increased during the years in issue. Held: 1. Petitioner's retentions of earnings and profits exceeded the reasonable needs of its business. 2. Petitioner was availed of for the purpose of avoiding the income tax with respect to its shareholder and is liable for the accumulated earnings tax. Sec. 531, I.R.C. 1954.
1Opinion of the Court
Chabot, Judge:
Respondent determined deficiencies in Federal corporate income tax (accumulated earnings tax imposed by sec. 5311) against petitioner for fiscal years ended August 31, 1972, and August 31, 1973,2 in the amounts of $18,744.83 and $26,996.75, respectively.
The issue for decision is whether petitioner was availed of for the purpose of avoiding the income tax with respect to its shareholder by permitting its earnings and profits to accumulate beyond the reasonable needs of its business (and, if so, what the amount is of the accumulated taxable income).
FINDINGS OF FACT
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2Cases cited19 opinions
- Helvering v. National Grocery Co.Supreme Court of the United States · 1938
- United States v. Donruss Co.Supreme Court of the United States · 1969
- United Business Corporation v. Commissioner of Int. Rev.Court of Appeals for the Second Circuit · 1933
- Faber Cement Block Co. v. CommissionerUnited States Tax Court · 1968
- Ivan Allen Co. v. United StatesSupreme Court of the United States · 1975
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3Cited by9 opinions
- J.H. Rutter Rex Mfg. Company, Inc. v. Commissioner of Internal RevenueCourt of Appeals for the Fifth Circuit · 1988
- Thompson Engineering Co., Inc. v. Commissioner of Internal RevenueCourt of Appeals for the Sixth Circuit · 1985
- EMI Corp. v. CommissionerUnited States Tax Court · 1985
- Feilen Meat Co. v. CommissionerUnited States Tax Court · 1984
- Berkley Machine Works & Foundry Co. v. CommissionerUnited States Tax Court · 1983
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