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:

Corporate Strategy

The overall scope and direction of a corporation and the way in which its various business operations work together to achieve particular goals.

Investor Relations Professionals

Specialists who manage communication between a company's corporate management and its investors, aiming to provide a true representation of the company's financial health and prospects.

Common Stock

A type of equity security that represents ownership in a corporation, with holders often having voting rights on corporate matters.

Investor Relations

The management of communication and relationship between a company and its investors, aiming to provide current and potential investors with an accurate account of company affairs.