Which of the Following Actions Cannot Be Used to Eliminate

question 57

Multiple Choice

Which of the following actions cannot be used to eliminate a potential accumulated earnings tax liability situation involving a corporation owned by a mother and a father?

• A)Create plans to invest retained earnings in a plant expansion.
• B)Make a cash distribution within 2 1/2 months after the end of the tax year.
• C)Make a deficiency distribution within 90 days of the date on which the IRS determines that an accumulated earnings tax liability is owed.
• D)Liquidate the corporation.

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Definitions:

Significant Influence

The power to participate in the financial and operating policy decisions of an investee but not control those policies.

Voting Shares

Shares that give the shareholder the right to vote on company matters at shareholder meetings.

ASPE

Accounting Standards for Private Enterprises, a set of accounting principles for private companies in Canada.

Significant Influence

Control exerted by an investor over a subsidiary or associate, typically through ownership of a substantial portion of voting stock, allowing the investor to affect financial and operating policies.