On Tue, 7 Apr 2009 13:00:05 EDT, "Gene E. Utterback, EA,
RFC, ABA" <gene[at]alliancetax.com> wrote:

- quote -

Not a big race fan?

Drew Edmundson

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"Harlan Lunsford" <lunstax[at]bellsouth.net> wrote in message
news:agxCl.25631$9a.8018[at]bignews1.bellsouth.net...
- quote -

Gee Whiz! I haven't heard the word "Bardahl" in years. But I believe that
you are spot on with the reference.

Gene E. Utterback, EA, RFC, ABA

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Gene E. Utterback, EA, RFC, ABA wrote:
- quote -

"Bardahl" spreadsheet and use it to see if the accumulated earnings
could be justified and discuss results with management.

ChEAr$,
Harlan Lunsford, EA n LA

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"Steve Pope" <spope33[at]speedymail.org> wrote in message
news:gr6tpn$gh2$1[at]blue.rahul.net...
- quote -

As an aside, something which I have NOT seen mentioned (forgive me if I
missed it) - THE Accumulated Earnings Tax or AET is NOT a self assessed tax.
There is no form to file to declare this. It ONLY APPLIED IF the IRS makes
an issue of it during an audit. So for most small businesses its not
something they need to worry about, at least not too much.

And I'd like to point out that THIS is another prime example of the
advantages of working with a tax pro. Were I, or Harlan, or Paul, or any
other of a number of pros who lurk and participate here were doing a return
for a company that even looked like it might be an AET target, we could
bring that to the attention of management/owners and help them find a way to
be prepared for it.

Gene E. Utterback, EA, RFC, ABA

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removeps-groups[at]yahoo.com <removeps-groups[at]yahoo.com> wrote:

- quote -

They were put into action back when corporate tax rates were
lower and individual tax rates were higher, so they sort-of
made more sense then. In any case, the government wants the
tax it is losing by corporations not making dividends.

Steve

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removeps-groups[at]yahoo.com wrote:
- quote -

original intent was to deter owners from unreasonably accumulating
capital and the arbitrary cap of 250,000$ was written into the law.

I've not heard of IRS going after such cases in recent years, but time
was when every well managed corporation had a dusty copy in the
president's desk of a well thought out plan for expansion to justify
the accumulated capital yet to be utilized.

ChEAr$,
Harlan Lunsford, EA n LA

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On Apr 2, 9:50 am, spop...[at]speedymail.org (Steve Pope) wrote:

- quote -

This does not make sense to me. Tax will be paid when the money is
finally distributed on a 1099-DIV. Besides the 250k of unappropriated
earnings might have already been taxed at 35% or more.

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removeps-groups[at]yahoo.com <removeps-groups[at]yahoo.com> wrote:

- quote -

There are two corporate taxes, and you may be liable for one or the
other. The first is the personal holding company tax, the
second the accumulated earnings tax, which is probably what
you are talking about.

If you're not liable for PHC, you might be liable for AE
tax depending upon facts and circumstances. You can use
the above arguments but they are strongest if they are
backed up with a record of actions (business plans, covenants
with lenders limiting dividends, etc.)

Like AMT, the PHC and AE taxes can kick in when you haven't
otherwise paid enough tax.

PHC and AE are both designed to inhibit taxpayers from placing
either investments or businesses into a corporation and
just letting them accumulate money.

Steve

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Tax on unappropriated earnings

Recently I learned that there is a 15% tax on unappropriated earnings
in excess of $250,000 for a C Corp.

Is the tax cumulitive? Suppose in the year N the company has 260k of
unappropriated earnings. So they have to pay tax on 10k. Suppose
next year they add 20k of unappropriated earnings. The retained
earnings - unappropriated says 280k now, right? Do they pay tax on
30k or just the new 20k?

Second, why would any C corp have unaccumulated earnings in the first
place? They could always say the money is appropriated for
acquisitions, building a new factory, although they can change their
mind later. Do any companies actually pay this (in my opinion
ridiculous) tax?

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >