(Solution) - Gamma Corporation has generated substantial cash flows from its manufacturing -(2025 Original AI-Free Solution)

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Gamma Corporation has generated substantial cash flows from its manufacturing activities. It has only a moderate need to reinvest its earnings in existing facilities or for expansion. In recent years, the corporation has amassed a large investment portfolio due to management?s unwillingness to pay dividends. The corporation is unlikely to be deemed a PHC but is concerned about its exposure to the accumulated earnings tax. Explain to Gamma?s president what steps he can take to avoid liability for the accumulated earnings tax in the current year? In future tax years? Do these steps require the payment of a cash dividend?