An excess earnings accumulation tax is levied when
A) shareholders receive dividends which exceed the firm's earnings.
B) firms do not pay dividends in order to delay the owner's tax liability.
C) firms do not pay dividends to reinvest in the firm.
D) earnings exceed dividends.

Question

Quizplus · Accepted Answer

An excess earnings accumulation tax is levied on firms that do not pay dividends in order to delay the owner's tax liability. This is done in order to prevent businesses from retaining earnings solely to avoid taxes, rather than reinvesting those earnings for the benefit of the business and its shareholders.

An Excess Earnings Accumulation Tax Is Levied When