U.S. Code » Title 26 » Subtitle Subtitle A— Income Taxes › Chapter CHAPTER 1— NORMAL TAXES AND SURTAXES › Subchapter Subchapter G— Corporations Used to Avoid Income Tax on Shareholders › Part PART I— CORPORATIONS IMPROPERLY ACCUMULATING SURPLUS

26 U.S.C. § 532

Corporations subject to accumulated earnings tax

Read at: OLRCuscode.house.gov CornellLII GovInfogovinfo.gov JustiaTitle 26 CasesGoogle Scholar
(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) ExceptionsThe accumulated earnings tax imposed by section 531 shall not apply to—(1) a personal holding company (as defined in section 542),(2) a corporation exempt from tax under subchapter F (section 501 and following), or(3) a passive foreign investment company (as defined in section 1297).(c) Application determined without regard to number of shareholders

The application of this part to a corporation shall be determined without regard to the number of shareholders of such corporation.

(Aug. 16, 1954, ch. 736, 68A Stat. 179; Pub. L. 98–369, div. A, title I, § 58(a), July 18, 1984, 98 Stat. 574; Pub. L. 99–514, title XII, § 1235(f)(1), Oct. 22, 1986, 100 Stat. 2575; Pub. L. 105–34, title XI, § 1122(d)(1), Aug. 5, 1997, 111 Stat. 977; Pub. L. 109–135, title IV, § 403(n)(1), Dec. 21, 2005, 119 Stat. 2626.)Editorial NotesAmendments

2005—Subsec. (b)(2) to (4). Pub. L. 109–135 redesignated pars. (3) and (4) as (2) and (3), respectively, and struck out former par. (2) which read as follow: “a foreign personal holding company (as defined in section 552),”.

1997—Subsec. (b)(4). Pub. L. 105–34 substituted “section 1297” for “section 1296”.

1986—Subsec. (b)(4). Pub. L. 99–514 added par. (4).

1984—Subsec. (c). Pub. L. 98–369 added subsec. (c).

Statutory Notes and Related SubsidiariesEffective Date of 2005 Amendment

Amendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.

Effective Date of 1997 Amendment

Pub. L. 105–34, title XI, § 1124, Aug. 5, 1997, 111 Stat. 978, provided that: “The amendments made by this subtitle [subtitle C (§§ 1121–1124) of title XI of Pub. L. 105–34, enacting section 1296 of this title, amending this section and sections 542, 551, 852, 1291, 1293, 1296 to 1298, and 4982 of this title, redesignating subpart C of part VI of subchapter P of this chapter as subpart D of part VI of subchapter P of this chapter, and renumbering sections 1296 and 1297 of this title as sections 1297 and 1298, respectively, of this title] shall apply to—“(1) taxable years of United States persons beginning after December 31, 1997, and“(2) taxable years of foreign corporations ending with or within such taxable years of United States persons.”

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to taxable years of foreign corporations beginning after Dec. 31, 1986, see section 1235(h) of Pub. L. 99–514, set out as an Effective Date note under section 1291 of this title.

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title I, § 58(c), July 18, 1984, 98 Stat. 576, provided that: “The amendments made by this section [amending this section and section 535 of this title] shall apply to taxable years beginning after the date of the enactment of this Act [July 18, 1984].”

Notes of Decisions
Cited in 18 cases, 1961–1993 · leading case: Presbyterian & Reformed Publ'g Co. v. Comm'r of Internal Revenue, 743 F.2d 148 (3rd Cir. 1984).
Sort: Relevance Newest Treatment
Presbyterian & Reformed Publ'g Co. v. Comm'r of Internal Revenue, 743 F.2d 148 (3rd Cir. 1984). “26 U.S.C. § 532 . A violation of this section is established by a corporation’s accumulation of earnings beyond the reasonable needs of the business, 26 U.”
Motor Fuel Carriers, Inc. v. Comm'r of Internal Revenue, 559 F.2d 1348 (5th Cir. 1977). “” 26 U.S.C. § 532 (a). The Code supplies an objective test for assessing the existence of this forbidden purpose, and it is upon this test that most cases focus: [T]he fact that the earnings and profits of a corporation are permitted to accumulate beyond the reasonable needs of…”
The Cheyenne Newspapers, Inc. v. Comm'r of Internal Revenue, 494 F.2d 429 (10th Cir. 1974). “26 U.S.C. § 532 (a) provides: (a) General Rule.”
Raymond I. Smith, Inc. v. Comm'r of Internal Revenue, 292 F.2d 470 (9th Cir. 1961). “See section 532 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 532 . Substantially the same test was set out in section 102(a) of the 1939 revenue act.”
Apollo Indus., Inc., Etc. v. Comm'r of Internal Revenue, 358 F.2d 867 (1st Cir. 1966). “§ 531 ) because it had been “availed of” for the purpose of avoiding shareholders’ income taxes by accumulating earnings rather than distributing them as dividends ( 26 U.S.C. § 532 ). The subsidiary but very important question, bearing on purpose, is whether earnings were…”
Duke Labs., Inc. v. United States, 222 F. Supp. 400 (D. Conn. 1963). “Code of 1954, § 532, 26 U.S.C. § 532 (1958). 10 . Int.Rev.Code of 1954, § 533, 26 U.”
Simons-E. Co. v. United States, 354 F. Supp. 1003 (N.D. Ga. 1972). “” * * * * ( 26 U.S.C. § 532 ) Under the pretrial order, the questions for decision are: (1) Did plaintiff permit its earnings and profits to accumulate beyond the reasonable needs of the business, which includes the reasonably anticipated needs of the business? If there is a…”
Motor Fuel Carriers, Inc. v. United States, 202 F. Supp. 497 (N.D. Fla. 1962). “* * * ” ( 26 U.S.C. § 532 .) “§ 533. Evidence of purpose to avoid income tax.”
Cummins Diesel Sales of Oregon, Inc. v. United States of Am., Robert H. Wills & Lillian Wills v. United States, 321 F.2d 503 (9th Cir. 1963). “However, appellants contend that the District Court erred in finding as matters of fact: (1) that earnings and profits of the corporate appellant were permitted to accumulate beyond the reasonable needs of its business in 1955 and 1956, and the corporate appellant was availed of…”
Inland Terminals, Inc. v. United States, 477 F.2d 836 (4th Cir. 1973). “” IRC § 532(a), 26 U.S.C. § 532 (a) (1967). If a wholly owned subsidiary accumulates income for the purpose of avoiding the imposition of the individual income tax upon the individual shareholders of its parent, the accumulated taxable income of the subsidiary is subject to the…”
The Kirlin Corp. v. Comm'r of Internal Revenue, 361 F.2d 818 (6th Cir. 1966). “” 26 U.S.C. § 532 . Corporations subject to accumulated earnings tax “(a) General rule.”
Network Sys. Corp. v. United States, 814 F. Supp. 778 (D. Minnesota 1993). · cites it 2× “Contrary to the IRS’s position, the statute makes clear that the tax is imposed on the accumulated taxable income of corporations “formed or availed of for the purpose of avoiding the income tax with respect to [their] shareholders or the shareholders of any other corporation,…”
Show all 18 citing cases →
Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.