Tax Guru-Ker$tetter Letter

Tuesday, September 17, 2002

Double Taxation

Bruce Bartlett is absolutely correct that the system of taxing profits from C corporations twice (first at the corporate level and again as dividend income to the shareholders) is completely immoral. The fair thing to do would be to either eliminate corporate income tax altogether or make dividend income tax free. That's not likely to happen, given the popularly held belief that corporations are inherently evil and not worthy of any tax breaks whatsoever.

Just a reminder, this is really only a problem with very large corporations that have a lot of shareholders who are not involved in the operation of the business. For small closely held corporations, it is easy to avoid double taxation by paying the shareholders in ways that are deductible expenses for the corporation, such as salaries, leases and royalties.

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 9/17/2002 09:55:00 PM Send this post: