C-Corp dividend

[tax info man]

Owner of C-corp said he talked to another president of a c-corp and they were paying a dividend to the stockholders and were only paying 15% corporate tax on this and then tax on the dividend at the personal level. Told him there was no such thing, but wanted to probe people on here to see if anyone had a clue what he was talking about.
Thanks

[JoshinNC]

Well you told him wrong!

Owner of C-corp said he talked to another president of a c-corp and they were paying a dividend to the stockholders and were only paying 15% corporate tax on this and then tax on the dividend at the personal level. Told him there was no such thing, but wanted to probe people on here to see if anyone had a clue what he was talking about.
Thanks

This is very much a planning technique in the C-Corp world. The corp keeps it's earnings in the 15% range and then distributes it out to the owners who also only pay max 15%, for total taxation of 30%. If the shareholder is in the highest tax bracket than he/she saves the difference.

[tax info man]

elaborate

My client has a 500k profit right now, so how can I keep his taxes in the 15% range

[BOB W]

This is very much a planning technique in the C-Corp world. The corp keeps it's earnings in the 15% range and then distributes it out to the owners who also only pay max 15%, for total taxation of 30%. If the shareholder is in the highest tax bracket than he/she saves the difference.

How about AMT on the Div subject to CG?

[tax info man]

As it stands now, with no dividend being paid, the client does not have an AMT problem.

[ChEAr$]

I'm missing something here

First, the corporation pays income tax on IT'S income, regardless of whether or not it
pays a dividend.

Or so I'm told. If there's been some kind of drastic change, please let me know.

Then, any dividends are taxed individually by recipients.

From what I'm reading above, someone is inferring that the corporation itself pays only
15% tax on the dividends it declares. Does that mean it pays regular tax on the excess?

[BOB W]

As it stands now, with no dividend being paid, the client does not have an AMT problem.

Plug in some CG and see where it goes.

[JoshinNC]

Maybe the other president is running a much less profitable biz?

My client has a 500k profit right now, so how can I keep his taxes in the 15% range

I always hate when a client comes in a says, "So and so said we do this and you should to" and then we have to explain why it can't be done. Sit down with your client, explain to him/her why his/her situation is not eligible for this type of treatment and collect your check.

[tax info man]

okay, lets start over

I, like others, was under the impression that the corp pays tax on its income whether or not it pays a dividend, but then joshinnc started in with the 30% max tax talk.

Josh would you clarify what situation you were talkin about in your first post. "The corp keeps it's earnings in the 15% range and then distributes it out to the owners w"ho also only pay max 15%"

So was I correct in saying that there is no situation that my client with a net profit of 500k can qualify for this.

[JON]

I caught a 300lb walleye!

I do not fish, but I can tell a good story. The communications are in error between your client and the friend who caught a 300 lb walleye. The point that should be considered is if corporations are overcapitalized, and some are, they ALL should have been taking advantage of 15% rate on dividends that could be paid out of the corporation. Now that you read what the Dem presidential runner really wants that may not be going away entirely next year if he is elected as if the stockholders make less than the $250,000 the 15% rate may still be there. If Nancy has her way who knows, the tax may be 100%.

[tax info man]

that's a big fish

If you could get me a picture of that fish I would appreciate it

[JohnH]

There will be extra postage to pay - with a fish that big, the picture's gonna weigh at least 30 lbs.