The accumulated earnings credit for a manufacturing company is the smaller of (a) retention for reasonable business needs minus net capital gains, or (b) $250,000 minus previous accumulations.

Question

Quizplus · Accepted Answer

The accumulated earnings credit is not defined by the smaller of those two options. It is generally a tax credit designed to prevent corporations from avoiding income tax through accumulating earnings instead of distributing them as dividends, but the specific calculation does not match the options provided.

The Accumulated Earnings Credit for a Manufacturing Company Is the Smaller