Question

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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

4. Excess Charitable contribution   and net capital loss during the year. Please refer below for more clarification

The accumulated earnings tax is calculated as follows: + + + + III Taxable income The dividends-received deduction The net operating loss deduction Capital loss carryovers included in taxable income Federal income taxes (excluding penalty taxes) Charitable contributions in excess of the 10% limitation Net capital losses incurred during the year Net LTCG over Net STCL (net of taxes) Accumulated taxable income Accumulated earnings credit Dividends-paid deductions Accumulated taxable income

5. All of the above are false.

A personal holding company (PHC) is known as a C corporation formed for the purpose of owning the stock of other companies; therefore, the holding company doesn't offer products or services but merely owns the shares of other corporations. However, almost all PHCs maintain investment portfolios, which may have significant tax implications should certain criteria be met.