Including working capital are 100000 19x1 19x2

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including working capital are $100,00019x119x2Current assets:Cash$15,000$30,000Marketable securities (cost) 10,00023,000Accounts receivable (net)55,000 45,000Inventory30,000 50,000Fixed assets (net)500,000552,000Total assets $610,000$700,000Current liabilities:Accounts payable$13,000$31,000Long-term debt 147,000119,000Common stock50,000 50,000Earnings and profits400,000500,000Total liabilities and equity$610,000700,000Are there unreasonable accumulations?
13Accumulated Earnings Tax Test: Do liquid assets exceed needs?Net current assets measured at FMVWorking capital needsReasonably anticipated needsIf positive, implies unreasonable accumulations
14Accumulated Earnings Tax Other factors suggesting forbidden purposeDealings between corporation and shareholders: loans, expenditures for shareholders' benefitInvestment in assets unrelated to the business (including loans between brother-sister corporations)Few dividends paid
15Calculation of AETCurrent taxable income+ Adjustments §535(b)FIT accruedNondeductible charitable contributionsNLTCG w/o loss carryovers - taxNet capital loss as adjusted+Dividend received deduction+NOL deductionDividends paid deduction (actual, throwback, consent)Accumulated earnings creditAccumulated taxable incomex20%Accumulated earnings tax
16Computation of AET CreditAET Credit: Greater of minimum credit or general creditMinimum Credit$250,000AE&P close of prior year less 2 1/2 month dividendsCreditGeneral credit for reasonable needs of business Reasonable needs of the businessCE&P for prior year less 2 1/2 month dividends (NLTCG - Tax on NLTCG)Credit
Problem 6-25$145,300Accumulated taxable income(24,950)0(340,000)E&P$364,950Reasonable needsCredit$29,060Accumulated earnings tax (in addition to regular tax)x 20%(300,000)$250,000Deminimus credit24,950General rule credit$170,25025,00050% x 50,000DRD(64,750)FITAdjustments$210,000Taxable incomeAdjusted taxable income
18Problem 6-25Taxable income$210,000AdjustmentsFIT(64,250)DRD50% x 50,00025,000$170,250CreditReasonable needs$ 364,950E&P(340,000)General rule credit24,950Deminimus credit$250,000(300,000)0(24,950)Accumulated taxable income$145,300x 20%Accumulated earnings tax (in addition to regular $29,060
Dividends-Paid Deduction for AETDividends paid during the current year Throwback dividends;Dividends declared during current year and paid within 2 ½ months after the close of the year, Consent dividendsHypothetical dividend (no cash or property

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