An Empirical Analysis of Tax Court Decisions in Accumulated Earnings Cases.

Abstract The results of this study are based on a statistical analysis of post-1954 accumulated earnings cases litigated in the Tax Court. The primary purpose was to identify the variables drawn from the regulations and IRS Audit Guidelines that have discriminated cases won by taxpayers from cases lost by taxpayers. A secondary purpose was to compare the relative discriminatory power of the regulations with that of the unpublished Guidelines. Discriminant analysis, using a stepwise procedure, was performed on the 59 cases included in the study. While the variables were capable of discriminating between winning and losing cases, the IRS Guidelines proved to be the more powerful discriminators. These results have important implications for taxpayers, for the Internal Revenue Service, and for policymakers and those who wish to influence them.