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Compare the tax burden for each entity and shareholder

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A corporation earns $2 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. There are 250,000 shares outstanding, you have owned 50,000 shares for >5 years. The corporate tax rate is 35%; the personal tax rate is 34% on ordinary income; and the dividend tax rate is 15%.

How much is left for you after all taxes are paid - first as a shareholder in a C corp. and secondly, as a shareholder in an S corporation.

Please show work in Excel.

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Solution Summary

The solution compares the tax burden for each entity and shareholder. How much money is left after all the taxes are paid is determined.

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As a shareholder for S Corp, you get 100,000
After taxes, you have 66000.
You only pay the individual rate because the S ...

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