Chris is the president and sole shareholder of MSI Corporation. He also lends money and rents...

Chris is the president and sole shareholder of MSI Corporation. He also lends money and rents a building to the corporation. Discuss how these business relationships between Chris and MSI Corporation can help avoid double taxation. What limitations are there on the use of such relationships?

In your analysis, include:

An introduction

Discussion

Conclusion.

Expert Solution

Introduction-

A corporation is a legal entity which is distinct and separate from its owner. Corporation can have a single shareholder or several shareholders.

Advantage of a corporation is that the shareholders are liable only for the amount they have invested in corporation i.e. Liability of a shareholder is limited.

Double Taxation results if the coporation issues dividend to its shareholder from the profit remaining after the payment of Corporate taxes.

If the dividend Distributed to the share holder is treated as qualified dividend instead of ordinary dividen then double taxation can be avoided.

Discussion-

In the given case study chris is the president and sole shareholder of MSI Corporation.

So to avoid the double taxation he can either report the dividend distributed as Qualified dividend instead of ordinary dividend.

OR he being the single shareholder can enjoy the profit of the company remaining after paying the corporate tax.

Conclusion-

Report Dividend as Qualified or do no distribute dividend.

ekkarill92 answered 1 year ago

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