During a recent IRS audit, the revenue agent decided that the Parker family used their closely held

corporation, Falco, to avoid shareholder tax by accumulating earnings beyond the reasonable needs of

the business. Falco's taxable income was $$840,000,$ it paid no dividends, and it had no business need to

retain income. Falco's marginal tax rate in prior years was $34$ percent.

Required:

a$.$ Compute Falco's accumulated earnings tax assuming that it had accumulated $$4$ million after$-$tax

income in prior years.

b$.$ Compute Falco's accumulated earnings tax assuming that it had accumulated $$124,000$ after$-$tax

income in prior years.

Complete this question by entering your answers in the tabs below.

Required A

Compute Falco's accumulated earnings tax assuming that it had accumulated $$4$ million after$-$tax income in prio

Note: Enter your answer in dollars and not in millions of dollars.

Accumulated earnings tax