Eagle,IncRecognizes That It May Have an Accumulated Earnings Tax Problem

Essay

Eagle,Inc.recognizes that it may have an accumulated earnings tax problem.According to its calculation,Eagle anticipates it has accumulated taxable income,before reduction for dividends paid,of $600,000 in 2008.Assume that its shareholders are in the 35% marginal tax bracket.
a.Calculate the maximum amount of tax that Eagle and its shareholders might pay if the accumulated earnings tax is assessed.
b.Calculate the maximum amount of tax that Eagle and its shareholders might pay if it distributes dividends to prevent an accumulated earnings tax assessment from occurring.