Identify Which of the Following Statements Is True

question 57

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's net capital gain (minus any federal income taxes paid with respect to such gain) increases the tax base for the accumulated earnings tax.
• C) A corporation accumulates earnings to fund a buy- sell agreement. Such an accumulation of earnings is a reasonable business need.
• D) All of the above are false.

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Definitions:

Real Price

The price of a good or service adjusted for inflation, reflecting its purchasing power relative to a specific base year.

Annual Inflation Rate

The percent increase or decrease in the general price level of goods and services over a period of one year.

Constant Dollar

A term used to describe a way of measuring economic statistics in which values are adjusted for inflation, allowing for comparison across different times.

Real Price

The price of goods or services adjusted for inflation, reflecting the actual purchasing power of money.