A comparation of the difference in total income tax for Georgia if her business was an S corporation as opposed to a C corporation with dividends/distributions.
I2-50 Computation of Tax. Georgia, a single taxpayer, operates a business that produces
$100,000 of income before any amounts are paid to her. She has no dependents and no
other income. She has itemized deductions of $18,000. Compute the total income tax that
would be paid assuming the following additional facts. Ignore payroll taxes.
a. Georgia operates the business as an S corporation receiving a salary from the corporation
of $60,000. The corporation distributes all of its remaining income to the shareholders.
b. She operates the business as a C corporation receiving a salary from the corporation of
$60,000. The corporation distributes its after tax income to her as a dividend.
c. How would the total tax change in each of the first two requirements if the corporation
made no payments to the owner other than the salary?
The solution compares the difference in total tax between a 'C' and an 'S' where dividends and/or distributions are paid out. A third part of the solution asks for tax differences if the distributions and/or dividends are not paid out.
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- Attached file(s):
- 159897 - 'c' and 's' tax comparisons.doc
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