Identify which of the following statements is true. A) Daisy Corporation is owned by a father and his son. The corporation employs 5 individuals to provide public accounting services. Father and son make all of the work assignments for the professional employees. The professional fees earned by the corporation are personal holding company income. B) Hakeem Corporation is owned by a mother and her two daughters. It reports $95,000 of rental income, $22,000 of depreciation, interest, and property taxes on the rental real estate, and $6,000 of dividend income. Hakeem Corporation is classified as a personal holding company. C) The personal holding company tax is levied to prevent closely held corporations from sheltering passive income. D) All of the above are false. baidu

Question

Business

Irvin Waters

13 December, 20:57

Identify which of the following statements is true. A) Daisy Corporation is owned by a father and his son. The corporation employs 5 individuals to provide public accounting services. Father and son make all of the work assignments for the professional employees. The professional fees earned by the corporation are personal holding company income. B) Hakeem Corporation is owned by a mother and her two daughters. It reports $95,000 of rental income, $22,000 of depreciation, interest, and property taxes on the rental real estate, and $6,000 of dividend income. Hakeem Corporation is classified as a personal holding company. C) The personal holding company tax is levied to prevent closely held corporations from sheltering passive income. D) All of the above are false. baidu

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Kamari Wade · Answer 1

C) The personal holding company tax is levied to prevent closely held corporations from sheltering passive income.

Explanation:

Personal holding company tax is imposed to discourage holding of undistributed investment income of C Corporation. As such option C is correct.

Option A is incorrect since the corporation is not PHC as it does not meet Income Test.

Option B is incorrect since it is having rental income of $95000 which will not be considered as PHC income as it will be more than 50% of AGI. It will not be classified as a personal holding company as it will not meet income test.

As option C is true option D is incorrect