Re: [taxchat] C Corp w/ large NI

Also, they are leaving themselves open to the possibility of double-taxation.  If the company holds an appreciable asset for a long time and the value increases, the company would pay tax at the ordinary rate.  If they have keep that money in the corporation, they could be taxed for excess retained earnings.  If it's too much to pay out as a reasonable salary, they could end up having to take a dividend, which is nondeductible to the C Corp, and taxable to the shareholder = Double-taxation nightmare.

 

 

 

From: Robert H. Somerville, CPA

Sent: Wednesday, September 24, 2008 5:20 PM

To: taxchat@yahoogroups.com

Subject: Re: [taxchat] C Corp w/ large NI

Cris:

 

Several item here:  1) The personal service corporation usually refers to occupations in the "learned and licensed" professions, such as doctors, attorneys, CPAs.

2) C corporations do not have a special capital gains rate for sale of assets, stocks, etc.  Everything is taxed at the regular corporate rates.  3) The C corp could fall into a Personal Holding Company category, if too much income is from passive investments.  The PHC tax rates tax the income remaining after paying the regular tax.

 

If the guy doesn't believe you, you can count on having problems later.  Pick and choose!

 

Good luck.

 

Bob S.

 

Robert H. Somerville, CPA
405 S State College, Ste 201
Brea, CA 92821
Phone:    714-529-4711
Fax:        714-529-0334   
Email:    rsomerville@survivetaxes.com
Web:      www.survivetaxes.com

 

Unless expressly stated otherwise in this communication, this advice is not intended
to be used, and cannot be used, for the purpose of avoiding federal tax penalties.

 

__._,_.___

IRS Circular 230 Disclosure: Unless expressly stated otherwise in this transmission, any tax advice contained herein, forwarded with or attached to this message was not and is not intended to be used, nor may it be relied upon or used, by any taxpayer for the purpose of (1) the avoidance of any tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions, or (2) promoting, marketing or recommending to another party any tax transaction or tax-related matters that may be addressed herein.

Your email settings: Individual Email|Traditional
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch to Fully Featured
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe

__,_._,___