REG : Accumulated earnings tax confusion

Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • #3035487 Reply
    tsv
    Participant

    I am using GLEIM review for REG preparation.

    I the book states the following:

    A corporation is liable for the AET when it accumulates earnings beyond the accumulated earnings credit of 250000 or its reasonable business needs whichever is greater. AET is only a tax on ATI. However, undistributed prior-year earnings still factor into the calculation of whether total accumulated earnings exceed the accumulated earnings credit or reasonable business need.

    In one of their questions in the tests,

    they are deducting prior year earnings from 250000 to arrive at accumulated earning credit. However, I could not find any explanation as to why that was done. Should not AEC = 250000 + reasonable business need ?

    can someone please throw some light since I am getting different information from different sources?

    #3035784 Reply
    HanHan
    Participant

    Hi, this is my understanding: If reasonable business needs > 250,000, then AEC = reasonable business needs. Otherwise, the AEC is $250,000, which is the minimum AEC amount.
    Hope this helps.

    #3035796 Reply
    HanHan
    Participant

    And from your post: “undistributed prior-year earnings still factor into the calculation of whether total accumulated earnings exceed …”

    So we add the undistributed prior-year earnings and current year's undistributed earnings and check if the total exceed $250,000, or reasonable business needs, whichever is greater.

    #3038928 Reply

    This may help – I haven't reviewed it for current-ness.

     
    Jeff Elliott, CPA (KS) - Another71.com
    NINJA Study Planner
    Free Notes
    #3038934 Reply
Viewing 5 posts - 1 through 5 (of 5 total)
Reply To: REG : Accumulated earnings tax confusion

You can use BBCodes to format your content.
Your account can't use Advanced BBCodes, they will be stripped before saving.

Your information:




Return to Forum Home