Before HASTINGS, Chief Judge, KNOCH, Circuit Judge, and LABUY, District Judge.
Plaintiff brought this action to recover federal surtax on accumulated earnings, allegedly assessed in error under the Internal Revenue Code of 1939, Section 102, 26 U.S.C.A. § 102, in the following amounts:
Taxable Calendar Year Amount
After trial, without jury, the District Court entered judgment for Defendant, from which Plaintiff has taken this appeal.
The District Court found that Plaintiff corporation was organized December 30, 1948, under the laws of Indiana; that it primarily designed and manufactured items for Tube Processing, Inc., a corporation controlled by the same family interests; and that for all practical purposes, both Tube Processing and Plaintiff were controlled by one man, Edward H. Seybert. The District Court also found that Plaintiff had failed to pay reasonable dividends to its shareholders with the intention of avoiding surtaxes to them, and that such accumulation was not required for the purpose of the business under the circumstances.
Plaintiff states the contested issues to be:
"1. Whether the Findings of Fact and Conclusions of Law of the District Court are sustained by the evidence in the record.
"2. Whether under the evidence before the District Court, it erred in finding as a fact and conclusion of law that Plaintiff had not carried its burden of proving that it had not accumulated unreasonable amounts of earnings during each of the years 1950 to 1953, inclusive, for the purpose of preventing the imposition of surtax upon its shareholders within the meaning of the provisions of Section 102(a) of the Internal Revenue Code of 1939."
Whether there has been an unreasonable accumulation of profits within the purview of Section 102, and whether Plaintiff corporation was availed of for the purpose of avoiding surtaxes to its stockholders, present questions of fact. Helvering v. Chicago Stock Yards Co., 1943, 318 U.S. 693, 63 S. Ct. 843, 87 L. Ed. 1086; Olin Corp. v. C.I.R., 7 Cir., 1942, 128 F.2d 185, 187. This Court will not disturb the District Court's findings unless they are arbitrary or unsupported by substantial evidence. ...