Cordelia Grey incorporated her one-person private investigator business. The first few years Cordelia drew a small salary, paid no dividends, and provided no fringe benefits. The retained earnings eventually reached $150,000. At this point, Cordelia made sure that the corporation had no taxable income by paying herself a higher salary, bonuses, and establishing qualified pension and profit-sharing plans.
a. May the accumulated earnings tax be imposed?
b. May the personal holding company tax be imposed?