26 U.S.C. § 537

Reasonable needs of the business

Read at: OLRCuscode.house.gov CornellLII GovInfogovinfo.gov JustiaTitle 26 CasesGoogle Scholar

(a) General ruleFor 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 rulesFor 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 needsThe 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.

(Aug. 16, 1954, ch. 736, 68A Stat. 182; Pub. L. 91–172, title IX, § 906(a), Dec. 30, 1969, 83 Stat. 714; Pub. L. 94–455, title XIX, § 1901(a)(75), Oct. 4, 1976, 90 Stat. 1777; Pub. L. 95–600, title III, § 371(c), Nov. 6, 1978, 92 Stat. 2859; Pub. L. 104–188, title I, § 1704(t)(33), Aug. 20, 1996, 110 Stat. 1889; Pub. L. 115–97, title I, § 13302(c)(2)(B), Dec. 22, 2017, 131 Stat. 2123.)Editorial NotesReferences in Text

Section 172(f), referred to in subsec. (b)(4), was repealed by Pub. L. 115–97, title I, § 13302(c)(2)(A), Dec. 22, 2017, 131 Stat. 2122.

The date of the enactment of the Tax Cuts and Jobs Act, referred to in subsec. (b)(4), probably means the date of enactment of title I of Pub. L. 115–97, which was approved Dec. 22, 2017. Prior versions of the bill that was enacted into law as Pub. L. 115–97 included such Short Title, but it was not enacted as part of title I of Pub. L. 115–97.

Amendments

2017—Subsec. (b)(4). Pub. L. 115–97 inserted “(as in effect before the date of enactment of the Tax Cuts and Jobs Act)” after “as defined in section 172(f)”.

1996—Subsec. (b)(4). Pub. L. 104–188 substituted “section 172(f)” for “section 172(i)”.

1978—Subsec. (b)(4), (5). Pub. L. 95–600 added par. (4) and redesignated former par. (4) as (5).

1976—Subsec. (b)(2). Pub. L. 94–455, § 1901(a)(75)(A), struck out “with respect to taxable years of the corporation ending after May 26, 1969” after “ ‘redemption needs’ means”.

Subsec. (b)(4). Pub. L. 94–455, § 1901(a)(75)(B), struck out “or (2)” after “paragraph (1)”.

1969—Pub. L. 91–172 designated existing provisions as subsec. (a)(1) and added subsecs. (a)(2), (3) and (b).

Statutory Notes and Related SubsidiariesEffective Date of 2017 Amendment

Amendment by Pub. L. 115–97 applicable to net operating losses arising in taxable years beginning after Dec. 31, 2017, see section 13302(e) of Pub. L. 115–97, set out as a note under section 172 of this title.

Effective Date of 1978 Amendment

Amendment by Pub. L. 95–600 applicable with respect to taxable years beginning after Sept. 30, 1979, see section 371(d) of Pub. L. 95–600, set out as a note under section 172 of this title.

Effective Date of 1976 Amendment

Amendment by 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 1969 Amendment

Pub. L. 91–172, title IX, § 906(b), Dec. 30, 1969, 83 Stat. 715, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “The amendment made by subsection (a) [amending this section] shall apply to the tax imposed under section 531 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] with respect to taxable years ending after May 26, 1969.”

Notes of Decisions

Cited in 13 cases, 1939–1984 · 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. § 537 . The legislative history of this provision reveals congressional concern that an inflexible application of the tax laws not stifle legitimate business expansion.”

Kerr-Cochran, Inc., a Nebraska Corp. v. Comm'r of Internal Revenue, 253 F.2d 121 (8th Cir. 1958). “In the Internal Revenue Code of 1954, § 537, 26 U.S.C.A. § 537 , the scope of the term “reasonable needs of the business” has been legally extended, to include “the ■ reasonably anticipated needs of the business.”

Raymond I. Smith, Inc. v. Comm'r of Internal Revenue, 292 F.2d 470 (9th Cir. 1961). “Section 537 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 537 . The Tax Court denied any such credit on the ground that the accumulations at the end of 1954, to the extent that they reflect ownership of the farm lands, improvements thereon and equipment used thereon, are…”

Apollo Indus., Inc., Etc. v. Comm'r of Internal Revenue, 358 F.2d 867 (1st Cir. 1966). “It did not decide, nor find it necessary to decide, whether Alies’ plans to manufacture reconstituted tobacco were sufficiently specific, definite and feasible 6 to meet the requirement of “reasonably anticipated needs” of 26 U.S.C. § 537 . Its conclusion was that “in any event…”

United States Trust Co. of New York v. Sears, 29 F. Supp. 643 (D. Conn. 1939). “It seems, however, that this alternative claim of defendant cannot be supported in the form she has made it, for the statute explicitly states that the reduced exemption there provided is only for the purpose of the additional tax therein levied, and the computation of the basic…”

Duke Labs., Inc. v. United States, 222 F. Supp. 400 (D. Conn. 1963). “Code of 1954, § 537, 26 U.S.C. § 537 (1958). 12 . Trico Products Corp.”

Inland Terminals, Inc. v. United States, 477 F.2d 836 (4th Cir. 1973). “” IRC § 537(a)(1), 26 U.S.C. § 537 (a)(1) (1972). The Regulations establish that the reasonableness of the accumulation should be measured by the judgment of a “prudent businessman.”

Cummins Diesel Sales of Oregon, Inc. v. United States, 207 F. Supp. 746 (D. Or. 1962). “Code of 1954, § 537, 26 U.S.C.A. § 537 . In Kerr-Cochran, Inc.”

Atlas Tool Co. v. Comm'r, 614 F.2d 860 (3rd Cir. 1980). “See 26 U.S.C. § 537 (1976). . 26 C.F.R. § 1.537-1 (a) (1979).”

Empire Land Corp. v. United States, 473 F. Supp. 1289 (E.D. La. 1979). · cites it 2× “26 U.S.C. § 537 , 26 C.F.R. § 1.537 -l(b).”

Exempt Carriers, Inc. v. United States, 644 F.2d 1027 (5th Cir. 1981). “26 U.S.C.A. § 537 (a)(1). In order to justify an accumulation of earnings, however, there must not only be an indication that the future needs of the business require such accumulation, but the corporation must have specific, definite, and feasible plans for the use of such…”

Carlen Realty Co. v. Laurie W. Tomlinson, Dist. Dir., I.R., 345 F.2d 998 (5th Cir. 1965). “…of this part, the term ‘reasonable needs of the business’ includes the reasonably anticipated needs of the business.” 26 U.S.C.A. § 537 .”

Show all 13 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.