1. Eamings accumulated for purposes of making loans to suppliers are considered to be for the reasonable needs of the business.TrueO FalseQUESTION 32The Internal Revenue Service may impose both the Accumulated Earnings Tax (Section 531) and the Personal Holding Company Tax (Section 541) on a corporation inthe same tax year.O FalseTrueQUESTION 33Earnings accumulated for Self-Insurance purposes are considered to be for the Reasonable Needs of the business for purposes of the Accumulated Eamings Tax(Section 531).O TrueO False

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Eamings accumulated for purposes of making loans to suppliers are considered to be for the reasonable needs of the business. O True O False

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Eamings accumulated for purposes of making loans to suppliers are considered to be for the reasonable needs of the business.
True
O False
QUESTION 32
The Internal Revenue Service may impose both the Accumulated Earnings Tax (Section 531) and the Personal Holding Company Tax (Section 541) on a corporation in
the same tax year.
O False
True
QUESTION 33
Earnings accumulated for Self-Insurance purposes are considered to be for the Reasonable Needs of the business for purposes of the Accumulated Eamings Tax
(Section 531).
O True
O False

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