For purposes of the accumulated earnings tax,reasonable needs of the business include all of the following with the exception of

Question

Quizplus · Accepted Answer

Making loans to stockholders is not considered a reasonable need of the business for the purpose of accumulated earnings tax because it benefits the individual stockholders rather than the business itself. The other options listed (providing working capital, acquiring assets or stock of another business, and anticipated expansion/plant replacement) are all legitimate business needs that could justify retaining earnings.

For Purposes of the Accumulated Earnings Tax,reasonable Needs of the Business