Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 75-305

1975-2 C.B. 228

Sec. 531

Full Text

Rev. Rul. 75-305 [fn1]

Advice has been requested whether the Internal Revenue Service will follow the decision of the United States Court of Appeals in the case of Golconda Mining Corp., 507 F.2d 594 (9th Cir. 1974), reversing 58 T.C. 139 and 58 T.C. 736 (1972) (Supplemental Opinion on motion for reconsideration).

The Ninth Circuit held that the accumulated earnings tax provisions imposed by section 531 of the Internal Revenue Code of 1954 are not applicable to publicly held corporations.

Section 532 of the Code provides, in part, that the accumulated earnings tax imposed by section 531 shall apply to every corporation (other than (1) a personal holding company, (2) a foreign personal holding company, and (3) a corporation exempt from tax under subchapter F) formed or availed of for the purpose of avoiding the income tax with respect to its shareholders.

The position of the Service is that there is no legal impediment in applying, in an appropriate case, the accumulated earnings tax to a publicly held corporation.

Accordingly, the Service will not follow the decision in the Golconda Mining Corp. case as a precedent in the disposition of similar cases.

[fn1] Based on TIR 1355, dated March 27, 1975.