C Corporations Flashcards
C Corporations:
Are C Corporations subject to Federal Income Tax?
Yes!
Subject to an entity-level Federal income tax which results in double taxation effect.
C Corporations:
How does a C Corp compute income tax expense?
Reports income and expenses and computes tax using a flat rate of 21% on the taxable income reported on Form 1120.
C Corporations:
How do shareholders report C corp distributed income?
Answer: Dividend Income
When a C corporation distributes its income, the corporation’s shareholders report dividend income on their own tax returns.
C Corporations:
Explain the double taxation of a C Corp?
Answer: Income that has already been taxed at the corporate level is also taxed at the shareholder level.
C Corporations:
Why does double taxation occur?
Double taxation stems, in part, from the fact that dividend
distributions are not deductible by a C corporation.
C Corporations:
What is the tax rate for qualified dividend income?
Qualified dividend income is taxed at a rate of 15% (20% for high-income taxpayers; 0% for lower-income taxpayers).
C Corporations:
Do tax attributes of C corp income and expenses pass through to its shareholders?
Answer: No!
Tax attributes of income and expense items of a C corporation do not pass through the corporate entity to the shareholders.
C Corporations:
Can losses be passed through to shareholders?
Answer: No!
C corporation losses are retained at the corporate level.
C Corporations:
Are wages paid to a shareholder-employee exempt from payroll taxes?
Answer: No!
Wages paid to a shareholder-employee of a corporation are subject to payroll taxes
C Corporations:
Are shareholders liable for a C-corp’s liabilities?
Answer: No!
State corporate law protects the personal assets of shareholders.
C Corporations:
How do C Corp’s enable capital raising?
Corporate form of business provides a vehicle for raising capital through widespread stock ownership
C Corporations:
What is the maximum length of life for a C-Corp?
Corporations exist indefinitely.
