Identify Which of the Following Statements Is True

question 50

Multiple Choice

Identify which of the following statements is true.

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

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Definitions:

Common Stock

A form of corporate equity ownership, a type of security representing ownership of a fraction of a company, providing voting rights and a share in the company’s profits.

Return on Investment

A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.

Treasury Stock

Refers to shares that were issued and later reacquired by the company. It is subtracted from total equity.

Voting Rights

The rights of shareholders to vote on company matters, typically exercised during a corporation's annual general meeting.