ZuoTi.Pro
Question

Dan is the sole shareholder of Tristar Corporation, a C corporation. In the current year, Tristar...

Dan is the sole shareholder of Tristar Corporation, a C corporation. In the current year, Tristar earned $350,000 and distributed $75,000 to Dan. Ken is the sole shareholder of Shield Corporation, an S corporation. In the current year, Shield earned $350,000 and distributed $75,000 to Ken. Contrast the tax treatment of Tristar Corporation and Dan with the tax treatment of Shield Corporation and Ken.

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

As the question speaks about distribution, which I assume talking about dividend.

Explanation:

C Corporation and S Corporation differs in taxation point of view. S Corporations are considered as pas through corporations in which income of the corporation is considered as income of the shareholders, and they have to pay tax, at personal income tax rates, on their share of earnings in the corporation, which is basically is proportion to their percentage of shareholdings.

On the other hand, C corporations pay federal corporate taxes on its earning and any distribution to their shareholders will fall as personal income of the shareholders and will be taxed at personal income tax rates. Dividend distributed by C Corporations are no deductible from its earning. Therefore, it amount for double taxation of same income.

Answer:

Based on above, Dan pay taxes on the earnings of $350,000, of Tristar corporation, as his own earnings and pay taxes at personal income tax rates.

Shield Corporation will pay federal corporate tax on $350,000 earnings and Ken will pay taxes on its dividend amount of $75,000 at personal income tax rates.

Accordingly they will file their returns with the IRS.

0 0
Add a comment
Know the answer?
Add Answer to:
Dan is the sole shareholder of Tristar Corporation, a C corporation. In the current year, Tristar...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Rajib is the sole shareholder of Cardinal Corporation, a calendar vear S corporation. In the current...

    Rajib is the sole shareholder of Cardinal Corporation, a calendar vear S corporation. In the current year, Cardinal generated a net profit of $350,000 ($520,000 gross income - $170,000 operating expenses) and distributed s80,000 to Rajib. Rajib must report the Cardinal Corporation profit of $350.000 on his Federal income tax return. True Faise

  • 9 Matt, the sole shareholder of Pastel Corporation (a C corporation), has the corporation pay him...

    9 Matt, the sole shareholder of Pastel Corporation (a C corporation), has the corporation pay him a salary of $600,000 in the current year. The Tax Court has held that $200,000 represents unreasonable compensation. Matt must report a salary of $400,000 and a dividend of $200,000 on his individual tax return. True False

  • ASSUME ALL CORPORATIONS ARE C CORPORATIONS Corporation X-a C Corporation-distributed the following to its sole shareholder-John-during...

    ASSUME ALL CORPORATIONS ARE C CORPORATIONS Corporation X-a C Corporation-distributed the following to its sole shareholder-John-during the year: Inventory-cost/basis of $5,000 with a fair market value of $9,000. The following facts are provided: Corp X has accumulated E and P of $ 12, 000 and current E and P of $2,000 - without regard to this distribution. Corp X's tax rate is 21 percent. John has a basis in the corporate stock of $23,000. 1. What are the tax effects...

  • ASSUME ALL CORPORATIONS ARE C CORPORATIONS Corporation X-a C Corporation-distributed the following to its sole shareholder-John-during...

    ASSUME ALL CORPORATIONS ARE C CORPORATIONS Corporation X-a C Corporation-distributed the following to its sole shareholder-John-during the year: Inventory-cost/basis of $5,000 with a fair market value of $9,000. The following facts are provided: Corp X has accumulated E and P of $ 12, 000 and current E and P of $2,000 - without regard to this distribution. Corp X's tax rate is 21 percent. John has a basis in the corporate stock of $23,000. 1. What are the tax effects...

  • After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation,...

    After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation, sold 22 percent of her JBD stock to ZNO Inc., a C corporation in a similar industry. During the current year JBD reports $1,800,000 of after-tax income. JBD distributes all of its after-tax earnings to its two shareholders in proportion to their shareholdings. How much tax will ZNO pay on the dividend it receives from JBD? What is ZNO’s tax rate on the dividend...

  • 15. The sole shareholder of an S Corp is active in the business and has a...

    15. The sole shareholder of an S Corp is active in the business and has a basis of $5,000 in the stock. The shareholder also has loaned $3,000 to the corporation. The shareholder's information return from the S Corp indicated the shareholder's portion of the loss from ordinary business is $7,000. a) How much if anything can the shareholder deduct on his individual tax return? b) What is the shareholder's basis in the shares at the beginning of the next...

  • Question 7 (2 points) Sean is the sole shareholder of a regular C corporation, and Ben...

    Question 7 (2 points) Sean is the sole shareholder of a regular C corporation, and Ben owns a proprietorship. In the current year, both businesses make a profit of $100,000, and each owner withdraws $50,000 from his business. With respect to this information, which of the following statements is incorrect? Sean must report $100,000 of income on his return. Ben must report $100,000 of income on his return. Ben's proprietorship is not required to pay income tax on $100,000. Sean's...

  • After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation,...

    After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation, sold 22 percent of her JBD stock to ZNO Inc., a C corporation in a similar industry. During the current year JBD reports $1,100,000 of after-tax income. JBD distributes all of its after-tax earnings to its two shareholders in proportion to their shareholdings. How much tax will ZNO pay on the dividend it receives from JBD? What is ZNO’s tax rate on the dividend...

  • After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation,...

    After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation, sold 22 percent of her JBD stock to ZNO Inc., a C corporation in a similar industry. During the current year JBD reports $800,000 of after-tax income. JBD distributes all of its after-tax earnings to its two shareholders in proportion to their shareholdings. How much tax will ZNO pay on the dividend it receives from JBD? What is ZNO’s tax rate on the dividend...

  • After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation,...

    After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation, sold 22 percent of her JBD stock to ZNO Inc., a C corporation in a similar industry. During the current year JBD reports $1,700,000 of after-tax income. JBD distributes all of its after-tax earnings to its two shareholders in proportion to their shareholdings. How much tax will ZNO pay on the dividend it receives from JBD? What is ZNO’s tax rate on the dividend...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT