Dickman Lumber Company, a Washington Corporation v. United States

Appellant corporation was assessed an accumulated earnings tax under the provisions of § 531 of the Internal Revenue Act of 1954. It paid the tax and then sued for refund in the court below.

The tax assessed related to accumulated income for 1959. In that year such income amounted to $142,091.88. From this it paid dividends and other sums to stockholders amounting to $13,060.76. Upon the balance, $129,031.12, the tax of $38,676.98 was assessed. As of December ”31, 1959, appellant’s current assets and current liabilities (in round dollars) were as follows:

All of the stock of the corporation (except for four qualifying shares in the names of employees) were owned by Ralph L. Diekman and his wife. Had the entire $129,000 mentioned been distributed in dividends in 1959, the Dickmans’ tax liability would have been increased by more than $87,000.

The trial court held that appellant’s “accumulated earnings and profits were in excess of its reasonably anticipated needs as of the end of 1959 and that the said $129,031.12 was not so needed”; that plaintiff had failed to sustain its burden of proving that it did not have, as one of its purposes for accumulating earnings and profits, the…