26 U.S.C. § 534

Burden of proof

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(a) General ruleIn any proceeding before the Tax Court involving a notice of deficiency based in whole or in part on the allegation that all or any part of the earnings and profits have been permitted to accumulate beyond the reasonable needs of the business, the burden of proof with respect to such allegation shall—(1) if notification has not been sent in accordance with subsection (b), be on the Secretary, or(2) if the taxpayer has submitted the statement described in subsection (c), be on the Secretary with respect to the grounds set forth in such statement in accordance with the provisions of such subsection.(b) Notification by Secretary

Before mailing the notice of deficiency referred to in subsection (a), the Secretary may send by certified mail or registered mail a notification informing the taxpayer that the proposed notice of deficiency includes an amount with respect to the accumulated earnings tax imposed by section 531.

Within such time (but not less than 30 days) after the mailing of the notification described in subsection (b) as the Secretary may prescribe by regulations, the taxpayer may submit a statement of the grounds (together with facts sufficient to show the basis thereof) on which the taxpayer relies to establish that all or any part of the earnings and profits have not been permitted to accumulate beyond the reasonable needs of the business.

(d) Jeopardy assessment

If pursuant to section 6861(a) a jeopardy assessment is made before the mailing of the notice of deficiency referred to in subsection (a), for purposes of this section such notice of deficiency shall, to the extent that it informs the taxpayer that such deficiency includes the accumulated earnings tax imposed by section 531, constitute the notification described in subsection (b), and in that event the statement described in subsection (c) may be included in the taxpayer’s petition to the Tax Court.

(Aug. 16, 1954, ch. 736, 68A Stat. 180; Aug. 11, 1955, ch. 805, §§ 4, 5, 69 Stat. 690, 691; Pub. L. 85–866, title I, § 89(b), Sept. 2, 1958, 72 Stat. 1665; Pub. L. 94–455, title XIX, §§ 1901(a)(73), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1776, 1834.)Editorial NotesAmendments

1976—Subsec. (a)(1), (2). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

Subsec. (b). Pub. L. 94–455, §§ 1901(a)(73)(A), 1906(b)(13)(A), struck out “In the case of a notice of deficiency to which subsection (e)(2) applies and which is mailed on or before the 30th day after the date of enactment of this sentence, the notification referred to in the preceding sentence may be mailed at any time on or before such 30th day” after “section 531”, and “or his delegate” after “Secretary”.

Subsec. (c). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

Subsec. (e). Pub. L. 94–455, § 1901(a)(73)(B), struck out subsec. (e) relating to application of provisions of section.

1958—Subsec. (b). Pub. L. 85–866 inserted “certified mail or” before “registered mail”.

1955—Subsec. (b). Act Aug. 11, 1955, § 5, inserted second sentence relating to notice of deficiency to which subsec. (e)(2) applies.

Subsec. (e). Act Aug. 11, 1955, § 4, permitted, in certain instances, application of this section to cases involving taxable years to which prior revenue laws apply.

Statutory Notes and Related SubsidiariesEffective Date of 1976 Amendment

Amendment by section 1901(a)(73) of Pub. L. 94–455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

Effective Date of 1958 Amendment

Amendment by Pub. L. 85–866 applicable only if mailing occurred after Sept. 2, 1958, see section 89(d) of Pub. L. 85–866, set out as a note under section 7502 of this title.

Notes of Decisions

Cited in 14 cases, 1958–2003 · leading case: Philip Kerner v. Arthur S. Flemming, Secretary of Health, Education and Welfare

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Philip Kerner v. Arthur S. Flemming, Secretary of Health, Education and Welfare (1960) ca2 “, Internal Revenue Code of 1954, §§ 534(a), 5649, 6902(a), 7422(a), 7454(a), 7491, 26 U.S.C.A. §§ 534 (a), 5649, 6902(a), 7422(a), 7454(a), 7491.”

R. Gsell & Co., Inc. v. Commissioner of Internal Revenue (1961) ca2 · cites it 2× “( 26 U.S.C.A. § 534 .) Thus, where the taxpayer has been sent a notification informing it that a proposed notice of deficiency includes an amount with respect to the accumulated earnings tax, the taxpayer may shift the burden of proof on the issue of whether the accumulation was…”

Haffner's Service Stations, Inc. v. Commissioner (2003) ca1 “26 U.S.C. § 534 (a). But this is not what occurred.”

The Smoot Sand & Gravel Corporation v. Commissioner of Internal Revenue (1960) ca4 “The Tax Court’s conclusion, far from being clearly erroneous, seems to be clearly correct. Ill On the question of burden of proof the-Tax Court decided that, in the circumstances of this case, the burden of proof rests with the taxpayer, notwithstanding Sec.”

Motor Fuel Carriers, Inc. v. Commissioner of Internal Revenue (1977) ca5 “26 U.S.C. § 534 (c). MFC submitted a timely statement here.”

Barrow Manufacturing Company, Inc. v. Commissioner of Internal Revenue (1961) ca5 “The petitioner urges that the Tax Court may not have put the burden of proof on the Commissioner, in accordance with Section 534 of the 1954 Internal Revenue Code, 26 U.S.C.A. § 534 , to establish that the earnings and profits have been permitted to accumulate beyond the…”

W. L. Mead, Incorporated v. Commissioner of Internal Revenue (1977) ca6 “Against this background, we find no need to analyze in detail the Tax Court’s handling of the 26 U.S.C. § 534 (1970) issue, since assuming the burden shifted to the Commissioner, as appellant claims, said burden was amply carried.”

Nemours Corporation v. Commissioner of Internal Revenue (1963) ca3 “See § 534 of the Internal Revenue Code of 1954, 26 U.S. C.A. § 534. The fact that Rule 32 of the Tax Court likewise placed the burden of proof on the Commissioner did not increase the obligation.”

The Shaw-Walker Company, a Corporation v. Commissioner of Internal Revenue (1968) ca6 · cites it 2× “The statement of the taxpayer submitted pursuant to § 534(c) of the Internal Revenue Code, 26 U.S.C. § 534 (c), 2 which is discussed hereinafter, is filed as an appendix to this opinion.”

Jerone E. Casey, Transferee of the Bankers Development Corporation v. Commissioner of Internal Revenue (1959) ca2 “Section 534 of the Internal Revenue Code of 1954, in its paragraphs (a) (2) and (c), 26 U.S.C. § 534 (a) (2), (c), provides that in circumstances present in the instant case the Commissioner should have the burden of proving the fact of the asserted unreasonable accumulation.”

Atlantic Properties, Inc. v. Commissioner of Internal Revenue (1975) ca1 “*1235 The Tax Court held that the corporation had not submitted such an explanatory statement of its reasonable needs as to shift the burden of proof to the government, 26 U.S.C. § 534 (a). The statements submitted were those of the warring blocs, not the corporation’s; they…”

Raymond I. Smith, Inc. v. Commissioner of Internal Revenue (1961) ca9 “Section 534(a) of the Internal Revenue Code of 1954, 26 U.S.C.A. § 534 (a). 3 The grounds set forth in the taxpayer’s statement are the same as those upon which it has relied in the Tax Court and on this review.”

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