During the early 20th century, corporations used holding

Subject : History

Question: During the early 20th century, corporations used holding companies to do which of the following?

A. Shelter earnings from income taxes

B. Exert a greater amount of political influence

C. Pursue a policy of vertical integration

D. Reduce the power of unions

Expert Verified Solution:

During the early 20th century, corporations primarily used holding companies to:

A. Shelter earnings from income taxes

Explanation:

A holding company is a business entity that owns a controlling interest in other companies, known as subsidiaries. This structure was commonly employed during the early 20th century for several reasons, but one of the significant motivations was to shelter earnings from income taxes. By using holding companies, corporations could engage in strategic financial planning to reduce their overall tax liabilities. This was achieved through various means, such as shifting profits between subsidiaries and taking advantage of tax laws and regulations.

Holding companies allowed large corporations to consolidate control over various businesses while often limiting direct operational involvement. This structure provided them with flexibility in managing finances and legal responsibilities, including optimizing tax outcomes.