C-Corp dividend

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  • tax info man
    Junior Member
    • Aug 2008
    • 17

    #1

    C-Corp dividend

    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
    Senior Member
    • Feb 2006
    • 1180

    #2
    Well you told him wrong!

    Originally posted by 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
    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.

    Comment

    • tax info man
      Junior Member
      • Aug 2008
      • 17

      #3
      elaborate

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

      Comment

      • BOB W
        Senior Member
        • Jun 2005
        • 4061

        #4
        Originally posted by JoshinNC
        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?
        This post is for discussion purposes only and should be verified with other sources before actual use.

        Many times I post additional info on the post, Click on "message board" for updated content.

        Comment

        • tax info man
          Junior Member
          • Aug 2008
          • 17

          #5
          As it stands now, with no dividend being paid, the client does not have an AMT problem.

          Comment

          • ChEAr$
            Senior Member
            • Dec 2005
            • 3872

            #6
            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?
            ChEAr$,
            Harlan Lunsford, EA n LA

            Comment

            • BOB W
              Senior Member
              • Jun 2005
              • 4061

              #7
              Originally posted by tax info man
              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.
              This post is for discussion purposes only and should be verified with other sources before actual use.

              Many times I post additional info on the post, Click on "message board" for updated content.

              Comment

              • JoshinNC
                Senior Member
                • Feb 2006
                • 1180

                #8
                Maybe the other president is running a much less profitable biz?

                Originally posted by tax info man
                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.

                Comment

                • tax info man
                  Junior Member
                  • Aug 2008
                  • 17

                  #9
                  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.

                  Comment

                  • JON
                    Senior Member
                    • Jul 2005
                    • 1265

                    #10
                    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%.

                    Comment

                    • tax info man
                      Junior Member
                      • Aug 2008
                      • 17

                      #11
                      that's a big fish

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

                      Comment

                      • JohnH
                        Senior Member
                        • Apr 2007
                        • 5339

                        #12
                        There will be extra postage to pay - with a fish that big, the picture's gonna weigh at least 30 lbs.
                        Last edited by JohnH; 09-24-2008, 11:34 AM.
                        "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

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