Masonry Magazine February 1969 Page. 22
Taxes
(Continued from page 21) ed its undistributed earnings from $1,021,288 to $1,679,135. The sole owner was paid a salary but no dividends were declared during this entire period.
In its opinion, written by Justice Marshall, the Supreme Court pointed out that the test should be that if even one of the purposes for a company's accumulation policy is the avoidance of shareholder's tax, then the accumulated earnings tax should be applied. Did the tax avoidance motives contribute to the decision to accumulate? However, "purpose" means "more than mere knowledge, undoubtedly present in nearly every case. It is still open for the taxpayer to show that even though knowledge of the tax consequence was present, that knowledge did not contribute to the decision to accumulate earnings." U.S. v. The Donruss Co. (U.S. Su. Ct. 1969)
HEAD OF HOUSEHOLD
Should a taxpayer be eligible, it is certainly worth while to file as head of a household because such status is accorded about 50% of the benefits available under a joint return. However, this status is not automatically available to unmarried persons. The taxpayer must not only be unmarried but must also maintain a household as the principal place of abode of 1) a child, a child's descendant, or a step-child or 2) another related person. More than one-half of the cost of maintaining the household must be paid by the taxpayer. While a taxpayer's unmarried child, descendant or step-child need not also qualify as a dependent of the taxpayer, other relatives must qualify as dependents.
The status is not lost by the temporary absence from the home of the dependent or the taxpayer so long as it is reasonable to assume that the person will return and the taxpayer continues to maintain the household in anticipation of the person's return.
Generally, it is thought that the taxpayer has to have as his own home the same place he maintains as the principal home of the dependent. However, a very recent Tax Court case allowed a taxpayer to file as a head of a household because he paid for the major portion of the cost of maintaining his parents in a boarding home for the aged. The court decided that in this manner the taxpayer did maintain a "home" for his parents. Robinson v. Commissioner, 51 T.C. -No. 52.
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MORGEN MANUFACTURING CO. Box 160-G2 Yankton, S. Dak. 57078
masonry • February, 1969