Egg Inc is a corporation that earns $300,000 for tax year 2019. The marginal individual tax...

Egg Inc is a corporation that earns $300,000 for tax year 2019. The marginal individual tax rate applicable to the entity’s shareholder is 37% on ordinary income and 20% on dividends. The corporate tax rate is 21% and the S corporation shareholders receive the full 20% of qualified business income deduction. All after tax income is distributed currently. Please compute the S corporation and C corporations’ available after-tax earnings.

Expert Solution

S Corporation income:

	S Corp	Cash flow
Distribution	$ 300,000	$ 300,000
Less: QBI deduction	-60000
Taxable amount	$ 240,000
× tax rate	37%
Tax liability	$ 88,800	$ (88,800)
After tax earnings		$ 211,200

After tax earnings is $211,200

C Corp:

	C Corp
Income	$ 300,000
Less: 21% Corp tax	$ (63,000)
Distribution	$ 237,000
Less: 20% dividend tax	$ (47,400)
After tax earnings	$ 189,600

After tax earnings is $189,600

Please rate.

ekkarill92 answered 2 years ago

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