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TITLE 26-INTERNAL REVENUE CODE statement on the grounds (together with facts sufficient to show the basis thereof) on which the taxpayer relies to establish that all or any part of the earnings and profits have not been permitted to accumulate beyond the reasonable needs of the business. (d) Jeopardy assessment If pursuant to section 6861(a) a Jeopardy as- sessment is made before the mailing of the notice of deficiency referred to in subsection (a), for purposes of this section such notice of deficiency shall, to the extent that it informs the taxpayer that such deficiency includes the accumulated earnings tax imposed by section 531, constitute the notification described in subsection (b), and in that event the statement described in subsection (c) may be included in the taxpayer's petition to the Tax Court. (Aug. 16, 1954, ch. 736, 68A Stat. 180; Aug. 11, 1955, ch. 805, §§ 4, 5, 69 Stat. 690, 691; Sept. 2, 1958, Pub. L. 85-866, title I, §89(b), 72 Stat. 1665; Oct. 4, 1976, Pub. L. 94-455, title XIX, §§ 1901(a)(73), 1906(b)(13)(A), 90 Stat. 1776, 1834.) AMENDMENTS 1976-Subsec. (a). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary" in pars. (I) and (2). Subsec. (b). Pub. L. 94-455, §§ 1901(a)(73)(A), 1906(b)(13)(A), struck out "In the case of a notice of deficiency to which subsection (e)(2) applies and which is mailed on or before the 30th day after the date of enactment of this sentence, the notification re- ferred to in the preceding sentence may be mailed at any time on or before such 30th day" following "sec- tion 531", and "or his delegate" following "Secretary". Subsec. (c). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (e). Pub. L. 94-455, § 1901(a)(73)(B), struck out subsec. (e) relating to application of provisions of section. 1958-Subsec. (b). Pub. L. 85-866 inserted "certified mail or" preceding "registered mail". 1955-Subsec. (b). Act Aug. 11, 1955, §5, added second sentence relating to notice of deficiency to which subsec. (e)(2) applies. Subsec. (e). Act Aug. 11, 1955, § 4, permitted, in cer- tain instances, application of this section to cases in- volving taxable years to which prior revenue laws apply. EFFECTIVE DATE OF 1976 AMENDMENT Amendment of subsecs. (b), (e) by section 1901(a)(73) of Pub. L. 94-455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out a3 an Effective Date of 1976 Amendment note under section 2 of this title. EFFECTIVE DATE OF 1958 AMENDMENT Amendment of subsec. (b) by Pub. L. 85-866 applica- ble only if mailing occurred after Sept. 2. 1958, see sec- tion 89(d) of Pub. L. 85-866, set out as an Effective Date of 1958 Amendment note under section 7502 of this title. § 535. Accumulated taxable income (a) Definition For purposes of this subtitle, the term "accu- mulated taxable income" means the taxable income, adjusted in the manner provided in subsection (b). minus the sum of the dividends paid deduction (as defined in section 561) and the accumulated earnings credit (as defined in subsection (c)). (b) Adjustments to taxable income For purposes of subsection (a), taxable income shall be adjusted as follows: (1) Taxes There shall be allowed as a deduction Fed- eral income and excess profits taxes and income, war profits, and excess profits taxes of foreign countries and possessions of the United States (to the extent not allowable as a deduction under section 275(a)(4)), accrued during the taxable year or deemed to be paid by a domestic corporation under section 902(a) or 960(a)(1) for the taxable year, but not including the accumulated earnings tax imposed by section 531, the personal holding company tax imposed by section 541, or the taxes imposed by corresponding sections of a prior income tax law. (2) Charitable contributions The deduction for charitable contributions provided under section 170 shall be allowed without regard to section 170(b)(2). (3) Special deductions disallowed The special deductions for corporations pro- vided in part VIII (except section 248) of sub- chapter B (section 241 and following, relating to the deduction for dividends received by corporations, etc.) shall not be allowed. (4) Net operating loss The net operating loss deduction provided in section 172 shall not be allowed. (5) Capital losses There shall be allowed as deductions losses from sales or exchanges of capital assets during the taxable year which are disallowed as deductions under section 1211(a). (6) Net capital gains There shall be allowed as a deduction the net capital gain for the taxable year (deter- mined without regard to the capital loss car- ryback or carryover provided in section 1212) minus the taxes imposed by this subtitle at- tributable to such net capital gain. The taxes attributable to such net capital gain shall be an amount equal to the difference between- (A) the taxes imposed by this subtitle (except the tax imposed by this part) for such year, and (B) such taxes computed for such year without including in taxable income the net capital gain for the taxable year (deter- mined with regard to the capital loss carry- back and carryover provided in section 1212). (7) Capital loss No allowance shall be made for the capital loss carryback or carryover provided in sec- tion 1212. (c) Accumulated earnings credit (I) General rule For purposes of subsection (a), in the case of a corporation other than a mere holding or investment company the accumulated earn- ings credit is (A) an amount equal to such part of the earnings and profits for the tax- able year as are retained for the reasonable needs of the business, minus (B) the deduc- tion allowed by subsection (b)(6). For pur- 71-999 0 - 78 - 28 (Vol. 7) Page 405 § 535