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Distributions of profits of an S-Corp are treated as dividends and taxes as regular income.
A capital gain would only be realized as dissolution of the business. Then the gain would be total distibution -(minus)- basis.
DearCustomer not exactly.
The tax advantage is that you do not pay SE tax on the distributions.
For that reason, most S-corps attempt to keep the W-2 wages low and maximize distributions.
But caution is in order. The IRS requires that share holders who are officers in the company be paid on W-2 wages prevailing wages for the level of work performed and reasonable for the amount of revenues genearated by the S-corp.
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