Identify Which of the Following Statements Is True

question 4

Multiple Choice

Identify which of the following statements is true.

• A)A corporation accumulates earnings to fund the redemption of a shareholder's stock following her death so as to provide her estate with liquidity to pay death taxes. Such an accumulation of earnings is a reasonable business need.
• B)A corporation accumulates earnings to fund a buy-sell agreement. Such an accumulation of earnings is a reasonable business need.
• C)A corporation's net capital gain (minus any federal income taxes paid with respect to such gain)increases the tax base for the accumulated earnings tax.
• D)All of the above are false.

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Definitions:

Domestic Disorder

A state of disturbance in the internal affairs of a country typically involving violence or public disorder.

Cabinet

A group of senior government officials, typically heads of departments or agencies, who advise the head of state or head of government.

Federal Government

The national government of a federal country, which shares power with state or provincial governments according to the constitution.

Departments

Major divisions within a government or organization that specialize in particular areas of public policy, administration, or services.