During a recent IRS audit, the revenue agent decided that Roger used his closely-held corporation, Dodger Incorporated, to avoid shareholder tax by accumulating earnings beyond the reasonable needs of the business. Dodger's taxable income for the year was $500,000, and it paid no dividends. Compute Dodger's accumulated earnings tax, assuming that it had accumulated $2 million after-tax income in prior years.

Multiple Choice

• $100,000

• $400,000

• $50,000

• $0