Paul, who is in the 33% tax bracket, is the sole shareholder of a corporation and receives a salary of $60,000 each year. To avoid double taxation, he makes an S election for the corporation. The corporation currently is earning $100,000, and he expects earnings to grow at a rate between 15% and 20% per year. The earnings are reinvested in the growth of the corporation, and no plans exist for distributions to Paul. What problem may Paul have created by making the S election?
Answer to relevant QuestionsWhich of the following are subject either directly or indirectly to the AMT? • Sole proprietorship. • Partnership. • C corporation. • S corporation. Prance, Inc., earns pretax book net income of $800,000 in 2014. Prance acquires a depreciable asset in 2014, and first-year tax depreciation exceeds book depreciation by $80,000. Prance reported no other temporary or ...Helpers, Inc., a qualifying § 501(c)(3) organization, incurs lobbying expenditures of $250,000 for the taxable year and grass roots expenditures of $0. Exempt purpose expenditures for the taxable year are $1,200,000. ...Roadrunner, Inc., is an exempt medical organization. Quail, Inc., a sporting goods retailer, is a wholly owned subsidiary of Roadrunner. Roadrunner inherited the Quail stock last year from a major benefactor of the medical ...Perch, Inc., an exempt organization, records unrelated business taxable income of $4 million. a. Calculate Perch’s UBIT. b. Prepare an outline of a presentation you are going to give to the new members of Perch’s board ...
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