Question 1

A C Corporation has accumulated earnings of $300,000. It is a service corporation (law firm). It has no specific business plan for the funds. Assume the accumulated earnings credit for service corps is $150,000. What is the amount subject to Accumulated Earnings Tax?

Accepted Answer

Accumulated Earnings Tax applies to earnings > Credit. Service Corp Credit = $150,000. $300,000 - $150,000 = $150,000 subject to tax.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using the $250,000 credit for a service corporation.

A C Corporation has accumulated earnings of $300,000. It is a service corporation (law firm). It has no specific business plan for the funds. Assume the accumulated earnings credit for service corps is $150,000. What is the amount subject to Accumulated Earnings Tax?

How to approach this question

Full Answer

Common mistakes

Practice the full CPA TCP Practice Exam 3

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