TAX: Penalty Taxes Flashcards
1
Q
What is the accumulated earnings tax?
A
Want to make sure that corporations are not just accumulated earnings to avoid the double taxation.
Corporations have to pay dividends if they don’t have a reasonable business need to accumulate earnings
2
Q
What is the personal holding company tax?
A
PHC tax is levied on a company that has a high percentage is coming from investment income as opposed to operation income.
3
Q
How do you calculate the accumulated earnings credit?
A
The greater of:
- Earnings needed for the reasonable business needs
- Minimum credit of $250,000 (150,000 for service corporations) less accumulated earnings and profits at the beginning of the year
