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Howard Corporation conducts a manufacturing business and has a compelling need to accumulate earnings. Its January 1, E&P balance is $600,000. It reports the following operating results for the current year:

Taxable income $700,000
Federal income taxes 238,000
Dividends paid: July 15 of the current year 50,000
February 10 of the following year 100,000

Other information relating to Howard's current year operations is as follows:

NOL carryover from last year deducted in the current year $100,000

Net capital gain 100,000

Dividends received from 10%-owned domestic corporation 75,000

Current year E&P before dividend payments is $400,000. Howard can justify the retention of $120,000 of current E&P to meet the reasonable needs of its business.

a. What is Howard's accumulated taxable income?

b. What is Howard's accumulated earnings tax liability?

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  • Reference No.:- M940777

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