
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC534]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
   Subchapter G--Corporations Used to Avoid Income Tax on Shareholders
 
          PART I--CORPORATIONS IMPROPERLY ACCUMULATING SURPLUS
 
Sec. 534. Burden of proof


(a) General rule

    In 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.

(c) Statement by taxpayer

    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 on 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, Secs. 4, 
5, 69 Stat. 690, 691; Pub. L. 85-866, title I, Sec. 89(b), Sept. 2, 
1958, 72 Stat. 1665; Pub. L. 94-455, title XIX, Secs. 1901(a)(73), 
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1776, 1834.)


                               Amendments

    1976--Subsec. (a)(1), (2). Pub. L. 94-455, Sec. 1906(b)(13)(A), 
struck out ``or his delegate'' after ``Secretary''.
    Subsec. (b). Pub. L. 94-455, Secs. 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, Sec. 1906(b)(13)(A), struck out ``or 
his delegate'' after ``Secretary''.
    Subsec. (e). Pub. L. 94-455, Sec. 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, Sec. 5, inserted second 
sentence relating to notice of deficiency to which subsec. (e)(2) 
applies.
    Subsec. (e). Act Aug. 11, 1955, Sec. 4, permitted, in certain 
instances, application of this section to cases involving taxable years 
to which prior revenue laws apply.


                    Effective 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.
