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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15601
Experience:  15years with H & R Block. Divisional leader, Instructor
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On the last day of the fiscal year a (close) C Corporation

Customer Question

On the last day of the fiscal year a (close) C Corporation identifies it's before tax profit at $50,000.00. If the Corporation pay dividends of $50,000.00 to shareholders on that date, does that reduce the Corporations taxable income to $0? What other actions can be done with the potential profits to reduce the tax liability?
Submitted: 2 years ago.
Category: Tax
Expert:  Robin D. replied 2 years ago.
Hello and thanks for trusting me to help you today. I am a tax adviser with over 20 years of experience.
Corporations may not legally deduct the dividend payments before taxes.
The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends.
Shareholders cannot deduct any loss of the corporation.
This is what creates a double tax.
C corporation can fully deduct long-term-care and disability insurance premiums without any additional income reported to the owners. This is an area that would reduce the taxable amount for the C corp.