Which of the Following Is Not a Permissible Reason for a Regular

question 26

Multiple Choice

Which of the following is not a permissible reason for a regular corporation to accumulate earnings at the entity level and avoid the imposition of the accumulated earnings tax?

• A) To construct a new plant facility in connection with expanding the corporation's business into a new geographic region
• B) To accumulate a fund of cash with which to pay off long-term debt due in twenty years
• C) To fund the development of a new product line
• D) To invest in the stock of an unrelated company to take advantage of the dividends received deduction

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Definitions:

Expected Return

The weighted average of all possible returns from an investment, accounting for the likelihood of each outcome.

Standard Deviation

Standard Deviation measures the amount of variation or dispersion from the average, indicating the risk associated with a variable.

Treasury Bills

Short-term government securities issued at a discount from the face value and maturing at par, typically within a year.

Beta

A measure of a stock's volatility in relation to the overall market, indicating the stock's risk compared to that of the average market risk.