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10 June, 14:22

You are a shareholder in an S corporation. The corporation earns $2 per share before taxes. Once it has paid any applicable taxes it will distribute the rest of its earnings to you as a dividend. The corporate tax rate is 50%, and the personal tax rate on income is 35%. How much is left for you after all taxes are paid?

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  1. 10 June, 16:36
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    From the $2 dollars of earnign per share

    the stockholders will receive $1.30 dollars as only personal income tax will be levied.

    Explanation:

    The S corportation do not pay corporate taxes. The earnings once distributed to the owners are taxed at their personal tax.

    In this case, 35% therefor after paying the taxes:

    $2.00 x (1 - 35%) = $ 1.30
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