Identify which of the following statements is true.
A)In practice, the accumulated earnings tax applies only to closely held corporations.
B)A corporation bears the burden of proving that its earnings are not being accumulated to avoid income taxes.
C)To avoid the accumulated earnings tax, a corporation needs to have a definite plan for expending the accumulated earnings.
D)All of the above are true.

Question

Quizplus · Accepted Answer

All the statements are true regarding the accumulated earnings tax. It primarily applies to closely held corporations to prevent them from avoiding income taxes by accumulating earnings rather than distributing them. The corporation has the burden of proof to show that earnings are not being accumulated for the purpose of avoiding income taxes, and having a definite plan for the use of the accumulated earnings can help in avoiding this tax.

Identify Which of the Following Statements Is True