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?

Question

Marely Raymond

Business

5 February, 12:53

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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Milton · Answer 1

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