Title 26 — Internal Revenue CodeRelease 119-73not60
§533 Evidence of Purpose to Avoid Income Tax
Title 26 › Subtitle 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 › § 533
Summary
If a corporation keeps profits beyond what the business needs, that is treated as proof shareholders meant to avoid income tax unless the company shows otherwise. A holding or investment company is treated the same.
Full Legal Text
Title 26, §533
Internal Revenue Code — Source: USLM XML via OLRC
(a)For purposes of section 532, the fact that the earnings and profits of a corporation are permitted to accumulate beyond the reasonable needs of the business shall be determinative of the purpose to avoid the income tax with respect to shareholders, unless the corporation by the preponderance of the evidence shall prove to the contrary.
(b)The fact that any corporation is a mere holding or investment company shall be prima facie evidence of the purpose to avoid the income tax with respect to shareholders.
Reference
Citations & Metadata
Citation
26 U.S.C. § 533
Title 26 — Internal Revenue Code
Last Updated
Apr 5, 2026
Release point: 119-73not60