Question ID: 1435345?

Benjamin9850523
Benjamin9850523 Posts: 2
edited March 21 in Financial Planners Professional Community
image.png

Despite being a 4% shareholder, why wouldnt the corporation be allowed to include Anna's compensation with it's operations and reduce the taxable liability (that is then shared with Anna as a pass-through)?

Tagged:

Best Answer

  • MichaelAngell_CFFP
    MichaelAngell_CFFP CFFP Faculty & Instructors Posts: 28 image
    Answer ✓

    What this question is emphasizing is that S corps do not pay taxes at the entity level. Powers Inc doesn't actually pay taxes. Income and expenses pass directly to the shareholders via form K1 and they pay at their personal rates. This is in contrast to C corps, which do pay taxes at the entity level.
    Michael

Answers

  • Benjamin9850523
    Benjamin9850523 Posts: 2

    I'm guessing the keyword here is "Deductible".

  • MichaelAngell_CFFP
    MichaelAngell_CFFP CFFP Faculty & Instructors Posts: 28 image
    Answer ✓

    What this question is emphasizing is that S corps do not pay taxes at the entity level. Powers Inc doesn't actually pay taxes. Income and expenses pass directly to the shareholders via form K1 and they pay at their personal rates. This is in contrast to C corps, which do pay taxes at the entity level.
    Michael

Categories