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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29569
Experience:  Taxes, Immigration, Labor Relations
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How should I treat dividends paid to a Corporate

Customer Question

How should I treat dividends paid to a Corporate Officers?
Ordinary or Qualified? it was cash and is a Corporation.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
For a definition of qualified dividends, refer to Publication 550, Investment Income and Expenses.Generally - You meet the holding period .Holding period. You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. The ex-dividend date is the first date following the declaration of a dividend on which the buyer of a stock is not entitled to receive the next dividend payment. When counting the number of days you held the stock, include the day you disposed of the stock, but not the day you acquired it. See the examples, below.Exception for preferred stock. In the case of preferred stock, you must have held the stock more than 90 days during the 181-day period that begins 90 days before the ex-dividend date if the dividends are due to periods totaling more than 366 days. If the preferred dividends are due to periods totaling less than 367 days, the holding period in the preceding paragraph applies..Most likely - if you owned shares long enough - that must be qualified dividends.
Customer: replied 1 year ago.
Thank but what happen if is just cash that was received every month ?
Expert:  Lev replied 1 year ago.
I assume that you have C-corporation - correct?If so - you will prepare the corporate tax return on form 1120 and will calculate taxable income (after deductions)Wages paid to employees (including corporate officers) will be reported on W2 and will be deducted by teh corporation.For instance - you will have $10,000 net income.Then corporation pays 15% corporate income tax or $1500.The retained earning is $8500Assuming the corporate distributes $12000 during the year.So - $8500 would be reported as dividends - and retained earning becomes zero,and remaining $3500 as non dividend distribution both are reported on form 1099div.Questions?