Which of the Following Statements Regarding the Accumulated Earnings Tax

question 101

Multiple Choice

Which of the following statements regarding the accumulated earnings tax is correct in 2008?

• A)If Blue, Inc.'s accumulated taxable income for 2008 is $180,000, the calculated accumulated earnings tax liability would be $53,450 [($50,000 * 15%) + ($25,000 * 25%) + ($25,000 * 34%) + ($80,000 * 39%)].
• B)Blue, Inc., calculates accumulated taxable income for 2008 of $100,000. Therefore, it should increase the amount paid to the IRS for 2008 by $15,000 ($100,000 * 15%).
• C)The accumulated earnings tax applies to C corporations, but applies to S corporations at only the shareholder level.
• D)The tax rate for the accumulated earnings tax of 35% is the same as the highest tax bracket for the corporate taxpayer.
• E)None of the above.

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Definitions:

Payor Bank

The bank upon which a check is drawn and that is responsible for paying the amount specified on the check to the payee.

Collected

Refers to the process of gathering or accumulating items, information, or funds.

Electronic Funds Transfers

The transfer of money between accounts by electronic means rather than the use of cash or paper documents.

Float Time

The period between when a check is deposited into a bank account and the time the funds are available for use.