26 U.S.C. § 534 — Burden of proof

(a) General rule. In a Tax Court case where the notice of deficiency is based, in whole or in part, on the claim that a company let its earnings and profits build up beyond what the business reasonably needs, the burden of proving that claim falls: (1) on the Secretary, if the Secretary did not send the notification described in subsection (b); or (2) on the Secretary — but only as to the grounds covered in the taxpayer's statement — if the taxpayer submitted the statement described in subsection (c). (b) Notification by Secretary. Before mailing the notice of deficiency in subsection (a), the Secretary may send the taxpayer, by certified or registered mail, a notice warning that the proposed deficiency includes an amount tied to the accumulated earnings tax under section 531. (c) Statement by taxpayer. Within a set time — at least 30 days after that notification goes out, as the Secretary's regulations specify — the taxpayer may send a written statement. The statement must lay out the grounds, with enough facts to back them up, showing that the company's earnings and profits were not held back beyond the business's reasonable needs. (d) Jeopardy assessment. If a jeopardy assessment is made under section 6861(a) before the deficiency notice is mailed, then for this section, the deficiency notice counts as the subsection (b) notification — as long as it tells the taxpayer the deficiency includes the section 531 accumulated earnings tax. In that case, the subsection (c) statement can be included in the taxpayer's petition to the Tax Court.