Omega Corporation has excess accumulated earnings. How much accumulated earnings tax is payable?

To determine the accumulated earnings tax (AET) payable by Omega Corporation, it is essential to understand the tax structure applied to excessive accumulated earnings. Corporations can accumulate earnings without penalty to cover reasonable business needs. However, once the accumulated earnings exceed a certain threshold, the IRS imposes a tax on the excess amounts.

The accumulated earnings threshold for tax purposes, as of the current guidelines, is generally around $250,000 for most corporations. If a corporation's accumulated earnings exceed this threshold without a legitimate business reason for doing so, the IRS may impose a tax of 20% on the excess accumulated earnings.

If the correct answer is $30,000, this figure indicates that the excess accumulated earnings, after accounting for the threshold and any reasonable business needs, is such that the tax on those excess amounts results in a total liability of $30,000.

This calculation could imply that the accumulated earnings beyond the threshold amount is $150,000, resulting in an accumulated earnings tax of $30,000 (20% of $150,000). Thus, the AET of $30,000 accurately represents the tax liability imposed on these excess earnings, aligning with the IRS guidelines on accumulated earnings taxation.