Consider a S corporation. The corporation earns $2 per share before taxes. The corporate tax rate...

Consider a S corporation. The corporation earns $2 per share before taxes. The corporate tax rate is 35%, the tax rate on dividend income is 20%, and the personal income tax rate is set at 28%. What are the shareholder's earnings from the corporation after all corresponding taxes are paid?

Expert Solution

S Corporation does not have any kind of double taxation effect on the dividend so the distributions made by the S Corporation are always tax free in nature.

Only tax will be paid by the individual in the nature of the individual taxation.

Shareholder earning will be

= Total earning per share (1-personal tax rate)

= 2(1-.28)

= $1.44

jeff jeffy answered 2 years ago

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