---
kind: "section"
citation: "26 U.S.C. § 533"
title: "26"
title_heading: "Internal Revenue Code"
number: "533"
heading: "Evidence of purpose to avoid income tax"
release: "119-102"
url: "https://uscodex.org/usc/26/533"
units:
  - "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. Evidence of purpose to avoid income tax

- (a) **Unreasonable accumulation determinative of purpose—** For purposes of [section 532](/usc/26/532.md), the fact that the earnings and profits of a [corporation](/usc/26/7701.md?p=a-3) are permitted to accumulate beyond the [reasonable needs of the business](/usc/26/537.md?p=a) shall be determinative of the purpose to avoid the income tax with respect to [shareholders](/usc/26/543.md?p=a-4), unless the [corporation](/usc/26/7701.md?p=a-3) by the preponderance of the evidence shall prove to the contrary.
- (b) **Holding or investment company—** The fact that any [corporation](/usc/26/7701.md?p=a-3) is a mere holding or investment [company](/usc/26/812.md?p=a) shall be prima facie evidence of the purpose to avoid the income tax with respect to [shareholders](/usc/26/543.md?p=a-4).

## Source credit

(Aug. 16, 1954, ch. 736, 68A Stat. 179.)