During a Recent IRS Audit, the Revenue Agent Decided That

question 87

Multiple Choice

During a recent IRS audit, the revenue agent decided that Roger used his closely-held corporation, Dodger Inc., to avoid shareholder tax by accumulating earnings beyond the reasonable needs of the business. Dodger's taxable income for the year was $500,000, and it paid no dividends. Compute Dodger's accumulated earnings tax, assuming that it had accumulated $2 million after-tax income in prior years.

• A) $100,000
• B) $400,000
• C) $50,000
• D) $0

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Definitions:

Competent

Having the necessary ability, knowledge, or skill to do something successfully or efficiently.

Outgroup Homogeneity Effect

The perception that members of an outgroup are more similar to each other than they actually are, often leading to stereotyping.

Similar

Having a resemblance or likeness, often referring to characteristics or qualities that are common between entities.

Ultimate Attribution Error

A bias in which negative behaviors by out-group members are attributed to their character, while similar actions by in-group members are attributed to situational factors.