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:

Dividend Growth

The rate at which a company's dividend payments increase over time, reflecting its ability to continually raise the amount of money returned to shareholders.

Stock Price

The cost of purchasing a share of a company, reflecting the market's valuation of the company at any given time.

Eps Growth Rate

The rate at which a company's Earnings Per Share (EPS) grows over a period.

Rate Of Return

Value augmentation or diminishment on an investment over a measured period, spotlighted as a percentage of the investment's embryonic cost.