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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 10898
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I have a small business corporation and want to know about

Customer Question

JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: I have a small business corporation and want to know about the treat of passive investments done by the corporation
JA: Is there anything else important you think the Accountant should know?
Customer: i want to know how the capital gain / dividient investment and dividend re-investment will be treated for tax
Submitted: 1 month ago.
Category: Finance
Expert:  Lane replied 1 month ago.

Hi. My name's Lane. I can help here.

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Is this a C-Corp or an S-Corp?

Expert:  Lane replied 1 month ago.

OK I still don't see you coming back in so I'll try to provide some general information.

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The C Corp, sometimes called the regular corporation, is a separate taxable entity and ALL income is taxed at the corporate rate.

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With S-Corps those investments (ordinary income, capital gain, etc.) will retain their character and be passed via the K-1 and taxed on the owners return.

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On big advantage, however, for a C Corp that makes its own investments is the "dividends received" deduction. (allows the corporation to receive dividends from another corporation, where 70% or more of the dividend income is tax-free.)

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On the negative side, however, C corporations may be subject to other types of taxes that do not commonly apply to small business corporations. The personal holding company tax applies if 60% or more of the corporation's income comes from investments, such as royalties and dividends, and the number of shareholders does not exceed 5.

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Also re: the C-Corp, The accumulated earnings tax is a 15% surcharge when accumulated earnings exceeds $250,000 (IRC §535). There may also be a corporate alternative minimum tax that may apply to ensure that the corporation pays at least a minimum of tax.

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And on the dividend reinvestment, that simply increases the C corporation's basis in the stock.

Expert:  Lane replied 1 month ago.

Please let me know if you have ANY questions at all, before rating me.

I hope you’ll rate me (using those stars, or faces on your screen, by clicking submit) based on thoroughness and accuracy, rather than any good news / bad news content.

Otherwise I’ll receive no compensation for the work here at all, from JustAnswer.

Thank you!

Lane

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents since 1986.

Expert:  Lane replied 1 month ago.

Hi,

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I’m just checking back in to see how things are going.

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Did my answer help?

If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

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But if you need more on this, please let me know.

Lane