Lim added that the TMAP also supports the proposal to revisit tax exemptions given to certain entities to allow for a more targeted system, as well as a proposal for the DOF to revisit the 10-percent improperly
accumulated earnings tax (IAET).
Paying the profits to himself as a tax-deductible salary or bonus may bring Nick an IRS penalty for unreasonable compensation, yet retaining the dividends in the company might lead to the
accumulated earnings tax.
A particularly suitable analogy can be found in the
accumulated earnings tax rules.
Questions cover 21 topics, including shareholder-related issues, determination of corporate income tax liability, tax accounting and procedure, judicial doctrines, earnings and profits, constructive dividends, stock distributions, redemptions, bootstrap sales,
accumulated earnings tax, complete liquidations, partnerships, comparison of entities, and Sections 351, 304, and 305.
9) In deciding whether a family owned bank was subject to the
accumulated earnings tax, the IRS took into account the regulatory scheme the bank was operating under to determine its reasonable needs.
Accumulated earnings tax and purchase of business life insurance.
The
accumulated earnings tax is a penalty tax against a corporation that holds profits beyond its normal business needs, thus keeping the profits from taxation upon distribution.
The purchase of life insurance to cover the potential loss of a bona fide key employee should not result in a significant risk of
accumulated earnings tax exposure in most cases.
9) The
accumulated earnings tax may be imposed on a corporation that has E&P in excess of the reasonable needs of the business.
The corporation is experiencing an
accumulated earnings tax problem.
Moreover, there appears to be little possibility that the
accumulated earnings tax would apply to the retained earnings of the U.
Question--Will life insurance owned by the corporation to fund the Section 303 redemption cause or aggravate an
accumulated earnings tax problem?
