Page:United States Statutes at Large Volume 68A.djvu/219

 CH. 1—NORMAL TAXES AND SURTAXES

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Subchapter G—Corporations Used to Avoid Income Tax on Shareholders Part I. Corporations improperly accumulating surplus. Part II. Personal holding companies. Part III. Foreign personal holding companies. Part IV. Deduction for dividends paid.

PART I—CORPORATIONS IMPROPERLY ACCUMULATING SURPLUS Sec. Sec. Sec. Sec. Sec. Sec. Sec.

531. 532. 533. 634. 535. 536. 537.

Imposition of accumulated earnings tax. Corporations subject to accumulated earnings tax. Evidence of purpose to avoid income tax. Burden of proof. Accumulated taxable income. Income not placed on annual basis. Reasonable needs of the business.

SEC. 531. IMPOSITION OF ACCUMULATED EARNINGS TAX.

In addition to other taxes imposed by this chapter, there is hereby imposed for each taxable year on the accumulated taxable income (as defined in section 535) of every corporation described in section 532, an accumulated earnings tax equal to the sum of— (1) 27}^ percent of the accumulated taxable income not in excess of $100,000, plus (2) 38)^ percent of the accumulated taxable income in excess of $100,000. SEC. 532. CORPORATIONS SUBJECT TO ACCUMULATED EARNINGS TAX. (a) GENERAL RULE. — The accumulated earnings tax imposed by section 531 shall apply to every corporation (other than those described in subsection (b)) formed or availed of for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation, by permitting earnings and profits to accumulate instead of being divided or distributed. (b) EXCEPTIONS.—The accumulated earnings tax imposed by section 531 shall not apply to— (1) a personal holding company (as defined in section 542). (2) a foreign personal holding company (as defined in section 552), or (3) a corporation exempt from tax under subchapter F (section 501 and following). SEC. 533. EVIDENCE OF PURPOSE TO AVOID INCOME TAX. (a) UNREASONABLE ACCUMULATION DETERMINATIVE OF P U R P O S E. —

For purposes of section 532, the fact that the earnings and profits of a corporation are permitted to accumulate beyond the reasonable needs of the business shall be determinative of the purpose to avoid the income tax with respect to shareholders, u*nless the corporation by the preponderance of the evidence shall prove to the contrary. § 533(a)

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