The purpose of the accumulated earnings tax is to discourage corporations from retaining excessive amounts of earnings if the funds are invested in assets unrelated to the business needs.

Question

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The accumulated earnings tax is designed to prevent corporations from retaining earnings as a way to avoid paying taxes on those profits. It encourages corporations to distribute profits to shareholders in the form of dividends, rather than hoarding excess cash that could be used for non-business purposes.

The Purpose of the Accumulated Earnings Tax Is to Discourage