Questions from Federal Taxation

Q: Explain the following statement: “Although the accumulated earnings tax can

Explain the following statement: “Although the accumulated earnings tax can be imposed on both publicly held and closely held corporations, the tax is likely to be imposed primarily on closely held co...

Q: The accumulated earnings tax is imposed only when the corporation is “

The accumulated earnings tax is imposed only when the corporation is “formed or availed of for the purpose of avoiding the income tax.” Does tax avoidance have to occur at the corporate or the shareho...

Q: How, in its first year of operation, can a newly

How, in its first year of operation, can a newly formed corporation be subject to the PHC tax but not the AMT and the accumulated earnings tax?

Q: Gamma Corporation has generated substantial cash flows from its manufacturing activities.

Gamma Corporation has generated substantial cash flows from its manufacturing activities. It has only a moderate need to reinvest its earnings in existing facilities or for expansion. In recent years,...

Q: Explain the Bardahl formula. Why have some tax authorities said that

Explain the Bardahl formula. Why have some tax authorities said that this formula implies a greater degree of mathematical precision than is actually the case? Does the Bardahl formula apply to servic...

Q: Different rules for calculating the accumulated earnings credit apply to operating companies

Different rules for calculating the accumulated earnings credit apply to operating companies, holding and investment companies, and service companies. Explain the differences.

Q: Determine whether the following statements about the accumulated earnings tax are true

Determine whether the following statements about the accumulated earnings tax are true or false: a. Before the IRS can impose the accumulated earnings tax, it need only show that tax avoidance was on...

Q: Bird Corporation purchases machinery for $3 million and places it in

Bird Corporation purchases machinery for $3 million and places it in service in June 2017. Installation costs are $75,000. The machine replaces an old machine that Bird purchased several years ago, wh...

Q: Parrish is a closely held C corporation. Robert and Kim Parrish

Parrish is a closely held C corporation. Robert and Kim Parrish own all its stock. The corporation, now in its second month of operation, expects to earn $200,000 of gross income in the current tax ye...

Q: Peter Jones has owned all 100 shares of Trenton Corporation stock for

Peter Jones has owned all 100 shares of Trenton Corporation stock for the past five years. This year, Mary Smith contributes property with a $50,000 basis and an $80,000 FMV for 80 newly issued Trento...