Question

Which of the following are attributes of a Subchapter S corporation? The corporation pays income taxes...

Which of the following are attributes of a Subchapter S corporation?

The corporation pays income taxes on all corporate income.

The corporation has the double toxation probiem.

None of the other answers are correct

When the carporation distributes dividends,income taxes are pald at the sharehclder's rate.

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Answer #1

None of the other answers are correct

An S corporation, for United States federal income tax, is a closely held corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. In general, S corporations do not pay any income taxes.

Double taxation to corporate shareholders is a result of the corporation paying income taxes, then the shareholders paying income taxes on the dividends they receive. Since an S corporation does not pay income taxes as a business entity, the owners can avoid the double taxation issue.

An S corporation does not have retained earnings in the traditional sense and does not distribute dividends, since dividends are paid out of after-tax profits and the S corporation does not pay taxes.

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