Question CPA-02060Dart Corp., a calendar year domestic C corporation, is not a personal holding company. For purposes of the accumulated earnings tax, Dart has accumulated taxable income for Year 1. Which step(s) can Dart take to eliminate or reduce any Year 1 accumulated earnings tax?I.Demonstrate that the "reasonable needs" of its business require the retention of all or part of the Year 1 accumulated taxable income.II.Pay dividends by March 15, Year 2.a.I only.b.II only.c.Both I and II.d.Neither I nor II.ExplanationChoice "c" is correct. Dart can take both actions to eliminate or reduce any Year 1 accumulated earnings tax. A corporation that can demonstrate that its reasonable business needs require it to accumulate earnings can escape the accumulated earnings tax on the portion reasonably accumulated. Dividends paid by the 15th day of the third month after the close of the corporation's tax year reduce the accumulated earnings subject to the accumulated earnings tax.Choices "a", "b", and "d" are incorrect. Each of these answers treats either I or II (or both) incorrectly.