Piper plans to organize a new business venture as a corporation and wants to know if it
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Question:
Piper projects that the new business will distribute 100% of its after-tax earnings every year to its shareholders. Piper’s only involvement with the entity will be as a capital investor. That is, Piper will not be actively engaged in business activities and is considered a passive investor. Finally, any business income allocation from a flow-through entity will qualify for the qualified business income deduction without any limitation.
a) Compute Piper’s after-tax income for each potential entity form (one calculation for forming as an S-Corporation and another for forming as a C-Corporation). (show your work).
b) What is the overall tax rate (combined owner and entity level) for organizing the business as an S corporation and as a C-Corporation? (show your work)?
Related Book For
Canadian Income Taxation planning and decision making
ISBN: 9781259094330
17th edition 2014-2015 version
Authors: Joan Kitunen, William Buckwold
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