Because of its quality investments, carolina corporation has always generated 30% to 40% of its gross income from passive sources. in the current year, carolina sold a block of stock in a company it acquired several years ago. as a result of the sale, the corporation realized a substantial long-term capital gain that will increase this year's investment income from 40% to 70% of gross income. explain to carolina's president why she should or should not be worried about the personal holding company tax. (assume that the stock ownership requirement is met.)

It is funny how doing so well in business is not always completely beneficial. First of all, Carolina's president should be worried that her can be considered a personal holding company (PHC). PHC receive at least 60% of its adjusted ordinary gross income (AOGI) from passive sources. The other requirement is that 50% of its stock is owned by five or fewer individuals or companies. Being a PHC means more taxes, that is why Carolina Corporation should try to avoid being considered a PHC.

Carolina can avoid being considered a PHC if its other investment income (income from passive sources) along with this investment income, does not exceed 60% of its AOGI.

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.

commercial banking

provide online payment services

provide online banking

asset management firms

invest in people's funds in securities

accept tax return refunds