Quiz Chapter C5 Quiz Submit Quiz his Question 1 pt 5017 3 co

Quiz: Chapter C:5 Quiz Submit Quiz his Question: 1 pt 5017 (3 complete) This Quiz: 7 pts possible The personal holding company tax and the accumulated earnings tax reflect efforts to prevent use of the corporate entity to avoid taxation. Explain the congressional intent behind these two tax measures Expiain tne congressionai intent Denina tne personai noiaing company tax. O A. Congress enacted this tax to prevent a corporation from retaining earnings to avoid the shareholder level income tax on distributed earnings. The measure takes the form of a penalty tax d B. Congress enacted this tax to prevent corporations from sheltering passive investment, or personal income within a corporate entity and have such earnings taxed at lower corporate tax imposed on a corporation that retains earnings exceeding the reasonable needs of the business rates. The measure taken is in the form of a penalty tax imposed on a closely held corporation that earns these incomes when the corporation fails to distribute sufficient after-tax earnings to its shareholders in the form of a dividend C. Congress enacted this tax to ensure income in a corporation is taxed appropriately. The corporation will pay an additional tax if they try to distribute the income in the form of a dividend of O D. Congress enacted this tax as a way to force S corporations and tax-exempt organizations to not abuse their corporate status. The measure taken is an additional tax imposed for every dollar Explain the congressional intent behind the accumulated earnings tax O A. Congress enacted this as a way to ensure personal holding companies and S corporations are not abusing their corporate status. The measure taken is in the form of an additional tax O B. Congress enacted this tax to prevent a corporation from retaining earnings to avoid the shareholder level income tax on distributed earnings. The measure takes the form of a penalty tax O C. Congress enacted this tax to ensure income in a corporation is taxed appropriately. The corporation will pay an additional tax if they try to distribute the income in the form of a dividend of earnings, which could be deducted to arrive to taxable income kept in the corporation for investment purposes imposed for every dollar kept in the corporation for investment purposes. imposed on a corporation that retains earnings exceeding the reasonable needs of the business earnings, which could be deducted to arrive to taxable income lick to select your answer

Solution

1-A PERSONAL HOLDING TAX LEVY ON COMPANIES WHO HAVE UNREASONABLE RETAINED EARNING TO SAVE TAX. AS THE TAX FOR CORPORATE ARELOWER THAN AT INDIVIDUAL LEVEL HENCE THEY TRY TO RETAINED MORE. SO THIS TAX LEVY AS PENALTY ON THEM. OPTION A IS RIGHT

2. OPTION B   THIS TAX LEVY ON COMPANIES WHO TRY TO AVOID TAX AT SHAREHOLDER LEVEL BY NOT GIVING DIVIDEND FROM INCOME AND TRY TO ACCUMULATE THEM. HOWEVER THIS DOESNT LEVY ON PERSONAL HOLDING COMPANYETC