TAKE ADVANTAGE OF THE NEW INCENTIVE TO 
                      RETAIN CASH IN THE CORPORATION
          
          
               With the top individual rate now substantially
          above the top corporate tax rate, there is an incentive
          for owners of regular corporations to take less money
          out in salary and retain more money for the corporation
          to invest.
               Each corporation can retain up to a cumulative
          $250,000 in earnings without incurring a penalty.  You
          can retain more accumulated earnings than that if the
          earnings are retained for the "reasonably anticipated
          needs" of the business.  Otherwise, the corporation is
          hit with a penalty tax of 39.6% of the excess
          accumulation.
               The courts have found that a number of business
          needs justify an accumulation of earnings: business
          expansion, business relocation, working capital needs,
          shareholder buyouts, product liability reserves, new
          equipment reserves, loan covenant requirements, and
          funds for loans to suppliers or creditors.
               To show that corporate accumulations are
          reasonable, you should take certain actions:
               1)  Set up consistent dividend and salary policies
          and document the reasons for them in corporate records
          and minutes. 
               2)  Document expansion and similar plans.  
               You need something more definite than a statement
          of possible future needs; blueprints or some other
          specific plans are more helpful.  Projections of future
          growth and associated capital needs should be generated
          and kept in the corporate books.
               Earnings accumulations are tough to justify if the
          corporation makes large loans to owners and their
          families or invests in assets or activities unrelated
          to the corporate business.