Identify which of the following statements is true.
A)Payment of deficiency dividends will prevent the imposition of the accumulated earnings tax.
B)All corporations are exempt from the accumulated earnings tax on their first $250,000 of accumulated earnings.
C)A health service corporation can claim an accumulated earnings credit of $250,000.
D)All of the above are false.

Question

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A) Payment of deficiency dividends does not prevent the imposition of the accumulated earnings tax. It only reduces the amount of tax owed.
B) Not all corporations are exempt from the accumulated earnings tax. The exemption only applies to personal service corporations (PSCs) and certain types of insurance companies.
C) The accumulated earnings credit of $250,000 is only available to PSCs and certain types of insurance companies. Health service corporations do not qualify for this credit.

Identify Which of the Following Statements Is True