Identify Which of the Following Statements Is True

question 20

Multiple Choice

Identify which of the following statements is true.

• A)In practice, the accumulated earnings tax applies only to closely held corporations.
• B)A corporation bears the burden of proving that its earnings are not being accumulated to avoid income taxes.
• C)To avoid the accumulated earnings tax, a corporation needs to have a definite plan for expending the accumulated earnings.
• D)All of the above are true.

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Definitions:

"S" Corporation

A type of corporation in the United States that meets specific Internal Revenue Code requirements, allowing profits to be taxed only at the shareholder level, not at the corporate level.

Legal Dissolution

The process of legally dissolving a corporation or partnership, effectively ending its existence.

Withdrawal

The act of removing funds from an account, or the act by an owner of taking assets out of a business for personal use.

Total Assets

The sum of all resources owned by a company having economic value, as reported on the balance sheet, including both current and long-term assets.