Question

What is meant by double taxation of C corporations? How can C corporation shareholders avoid or reduce double taxation (without electing S status) on the corporate distributions they receive?

Answer 1

Answer:-

• Twofold tax assessment of C Corporation implies on the grounds that the profits C enterprise paid to its investor are assessable in the hands of investors and is additionally not deductible by the partnership are saddled independently as organization tax assessment .
• So both C organization and its investor are separate citizens.
• Organizations first settle corporate regulatory obligations on the organization benefit then,When that benefit is dispersed to the investors as profits, the investors are then likewise burdened the company reports yearly profits installments on 1099-DIV frames in box 1 as customary profits and in box 2 as qualified profit and the investor report the profits on their own profits and the expense is figured utilizing conventional assessment rates.
• Thus, in the route specified over the twofold tax assessment can be stayed away from.
• The weight of twofold tax assessment can be diminished or disposed of if the sums is accounted for in box 2 of 1099-DIV.
• In the event that Corporation keep the benefits as held income if the company impose is not as much as investor minor duty, benefits can be circulated in type of pay ,the benefits can be given to investor in type of credit ,the relatives can be set up s workers and pay them compensation ,however it must be authentic and bona fide pay to them.