During a Recent IRS Audit, the Revenue Agent Decided That

question 32

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 $130,000 after-tax income in prior years.

• A) $75,000
• B) $94,500
• C) $57,000
• D) $37,500