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rakhi.v
rakhi.v, Tax Attorney
Category: Tax
Satisfied Customers: 4474
Experience:  Have graduated in Law with specialization & emphasis in Financial Laws and has working experience of over a decade.
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This is a tax question. I am a corporation (of one) and my

Customer Question

This is a tax question. I am a corporation (of one) and my corporation owns stock, which it has had for the last 5 years. I am going to sell the stock and I expect to pay taxes at the capital gains rate. My question is this: how will my tax burden vary depending on whether I am a C or an S corporation? (I live in New York City, if that matters.)
Submitted: 2 months ago.
Category: Tax
Expert:  rakhi.v replied 2 months ago.

Dear Friend,

Hello and welcome. Thank you for providing an opportunity to assist you.

S Corp and C Corp create different tax liabilities if we talk about ordinary taxes or capital gains.

In C Corporation we encounter Double taxation of profits. Income is taxed first at the corporate level. Remaining profits are distributed as dividends and taxed again at the individual level. So long as S Corporations are concerned, Profits are passed through directly to shareholders, escaping corporate level tax.

Having said this, so far as capital gains are concerned, In C Corporations, Capital gains are taxed at the same level as ordinary income. In S Corp, Capital gains pass through to shareholders and are eligible for favorable capital gain tax rates for individuals.

The following is for your general reference and understanding.

http://www.fminet.com/media/pdf/newsletter/MAAdvisor_2009_Summer.pdf

I am sure this would help.

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Warm Regards,