Question

Your client is facing a possible personal holding company tax or accumulated earnings tax in 2017....

Your client is facing a possible personal holding company tax or accumulated earnings tax in 2017. Advise the client as to the total tax due and what the effective tax rate will be for this manufacturing company based on these facts:

Taxable income $480,000
Dividends received deduction 15,000
Accumulated earnings credit 12,200
Dividends paid 60,000
Federal income taxes 158,400
Cost of Goods Sold 135,000
Excess charitable contributions 18,100

Round the effective tax rate answer to one decimal place.

What is the UPHCI? $
The total tax due is $
The effective tax rate based on the above facts is  %.

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Answer #1
Taxable Income 480000
Adjustments :
Plus: Dividend receved deduction 15000
Excess charitable deductions 18100
Accumulated earnings credit 12200
Less: Federal Income Taxes 158400
Less: Dividend paid 60000
Cost Of Goods Sold 135000
UPHCI 171900
Applicable PHC rate ( Section 541 ) 20%
PHC Tax 34380
Plus: Federal Income Taxes 158400
Total Taxes 192780
Effective tax rate (195780/480000) 40.2 %
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