Question

1. Which of the following actions cannot be used to eliminate a possible personal holding company tax liability involving a corporation owned by a mother and a father? A) Sell additional stock to other family members. B) Make a cash distribution within 2 1/2 months of the end of the tax year. C) Make a deficiency distribution within 90 days of the date on which the IRS determines that a personal holding company liability is owed. D) Liquidate the corporation. 2. Identify which of the following statements is false. A) A corporation files a Schedule AE to report the amount of its accumulated earnings tax liability for the tax year. B) A corporation that is subject to the accumulated earnings tax may also be subject to interest and underpayment penalties on the amount of the unpaid liability. C) A corporation files a Schedule PH to report its PHC tax for the tax year. D) The corporate AMT liability is reported on Form 4626. 3. The accumulated earnings tax is imposed at what rate? A) 10% B) 20% C) 15% D) 35% 4. In determining accumulated taxable income for the purpose of the accumulated earnings tax, which one of the following is allowed as a deduction? A) excess charitable contributions B) dividends-received deduction C) net operating loss deduction D) net capital loss for the current year 5. Identify which of the following statements is true. A) Daisy Corporation is owned by a father and his son. The corporation employs 5 individuals to provide public accounting services. Father and son make all of the work assignments for the professional employees. The professional fees earned by the corporation are personal holding company income. B) Hakeem Corporation is owned by a mother and her two daughters. It reports $95,000 of rental income, $22,000 of depreciation, interest, and property taxes on the rental real estate, and $6,000 of dividend income. Hakeem Corporation is classified as a personal holding company. C) The personal holding company tax is levied to prevent closely held corporations from sheltering passive income. D) All of the above are false.

Answer 1

1) Solution: Sell additional stock to other family members

Explanation: The selling of the additional stock to other members in family is not allowed for the elimination of a possible personal holding company tax ability which involves a corporation owned by a father and a mother

　

2) Solution: A corporation files a Schedule AE to report the amount of its accumulated earnings tax liability for the tax year.

Explanation: The corporation would not file a Schedule AE while reporting the accumulated earnings amount for tax liability

　

3) Solution: 15%

Explanation: The accumulated tax earnings would be imposed at 15%

　

4) Solution: Net capital loss for the current year

Explanation: In the computation of accumulated taxable income for accumulated tax earnings the net capital loss for the current year is allowed as a deduction