During a recent IRS audit, the revenue agent decided that Apple, an individual, used his closely-held corporation, Fruit Tree Inc., to avoid shareholder tax by accumulating earnings beyond the reasonable needs of the business. Fruit Tree Inc.'s taxable income for the year was $875,000 and it paid no dividends. Compute Fruit Tree Inc.'s accumulated earnings tax, assuming that it had accumulated $227,500 after-tax income in prior years. Also assume that the accumulated earnings tax rate is 20% and up to $250,000 can be accumulated without incurring the accumulated earnings tax. $125,000 O $175,000 O $170,500 O $148,750

During a recent IRS audit, the revenue agent decided that Apple, an individual, used his closely-held corporation, Fruit Tree Inc., to avoid shareholder tax by accumulating earnings beyond the reasonable needs of the business. Fruit Tree Inc.'s taxable income for the year was $875,000 and it paid no dividends. Compute Fruit Tree Inc.'s accumulated earnings tax, assuming that it had accumulated $227,500 after-tax income in prior years. Also assume that the accumulated earnings tax rate is 20% and up to $250,000 can be accumulated without incurring the accumulated earnings tax. $125,000 O $175,000 O $170,500 O $148,750

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter17: Corporations: Introduction And Operating Rules

Section: Chapter Questions

Problem 6BCRQ

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During a recent IRS audit, the revenue agent decided that Apple, an individual, used his closely-held
corporation, Fruit Tree Inc., to avoid shareholder tax by accumulating earnings beyond the reasonable
needs of the business. Fruit Tree Inc.'s taxable income for the year was $875,000 and it paid no
dividends. Compute Fruit Tree Inc.'s accumulated earnings tax, assuming that it had accumulated
$227,500 after-tax income in prior years. Also assume that the accumulated earnings tax rate is 20%
and up to $250,000 can be accumulated without incurring the accumulated earnings tax.
。。。
$125,000
$175,000
$170,500
$148,750

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