Thurgood Marshall

“ Respondent would have us adopt a test that requires that tax avoidance purpose need be dominant, impelling, or controlling. It seems to us that such a test would exacerbate the problems that Congress was trying to avoid. Rarely is there one motive, or even one dominant motive, for corporate decisions. Numerous factors contribute to the action ultimately decided upon. Respondent's test would allow taxpayers to escape the tax when it is proved that at least one other motive was equal to tax avoidance. ”

“ As this brief summary indicates, the legislative history of the accumulated earnings tax demonstrates a continuing concern with the use of the corporate form to avoid income tax on a corporation's shareholders. Numerous methods were employed to prevent this practice, all of which proved unsatisfactory in one way or another. Two conclusions can be drawn from Congress' efforts. First, Congress recognized the tremendous difficulty of ascertaining the purpose of corporate accumulations. Second, it saw that accumulation was often necessary for legitimate and reasonable business purposes. ”

“ It would permit the taxpayer to escape the tax if it could convince the jury that for other, perhaps irrational, reasons it would have accumulated even had no tax saving been possible, thus affording the opportunity for proof of a 'contrary' purpose which Congress intended to provide. ”

“ It appears clear to us that the congressional response to these facts has been to emphasize unreasonable accumulation as the most significant factor in the incidence of the tax. The reasonableness of an accumulation, while subject to onest difference of opinion, is a much more objective inquiry, and is susceptible of more effective scrutiny, than are the vagaries of corporate motive. ”

“ Finally, the Government points to the fact that prior to adoption of § 102 of the Revenue Act of 1938, (52 Stat. 483) the forerunner of § 532 (a) used the words 'the purpose,' while the evidentiary section used the words 'a purpose,' thus indicating that tax avoidance need only be one purpose. Respondent replies that the change from 'a' to 'the' in the evidentiary section supports its conclusion. Respondent also contends that the statute before the change was consistent with its construction. ”

“ Commissioner of Internal Revenue, 281 F.2d 488 (1960) , in part based its conclusion that tax avoidance must be the 'primary or dominant-purpose' on the use of 'the' rather than 'a.'↑ No change was made in that part of the statute providing that ' (t) he fact that any corporation is a mere holding or investment company shall be prima facie evidence of a purpose' to avoid tax. ”

“ Wiener also expressed a general desire to expand and a more specific desire to invest in respondent's major distributor, the Tom Huston Peanut Company. There were no definite plans during the tax years in question, but in 1964 respondent purchased 10,000 shares in Tom Huston at a cost of $380,000.
The Commissioner of Internal Revenue assessed accumulated earnings taxes against respondent for the years 1960 and 1961. ”

“ Both types of holding companies are taxed under other provisions of the Code. See Internal Revenue Code of 1954, §§ 541-547 (personal holding companies) ; Internal Revenue Code of 1954, §§ 551-558 (foreign personal holding companies) .↑ The First Circuit in Young Motor Co. ”