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C Corporation |
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C Corporation A corporation that elects to be taxed as a corporation. The C corporation pays federal and state income taxes on earnings. When the earnings are distributed to the shareholders as dividends, this income is subject to another round of taxation (shareholder's income). Essentially, the C corporations' earnings are taxed twice. In contrast, the S corporation's earnings are taxed only once. C Corporation A business that is legally completely separate from its owners. Most publicly-traded companies ? and all major ones ? fall under this classification. For United States tax purposes, C corporations are required to pay income taxes on their profits. The advantage to a C corporate structure is the fact that, unlike S corporations, there is no limit to the number of shareholders. A disadvantage is the fact that, because a C corporation is taxed itself and its individual shareholders are taxed on dividends, it is subject to double taxation. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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The facts are the same as in Example 2, except that Quiggley is a C corporation. The corporation had to file as a C corporation for that tax year, but both the entity and its shareholders treated the corporation as an S corporation for all succeeding years; also, the limitations period for all relevant tax years for both the corporation and all shareholders had not lapsed. Ten years later in Hitchins, 103 TC 711 (1994), the court determined that the shareholder's basis in his S stock did not include debt owed to him by a C corporation that was assumed by the S corporation in partial payment of its own debt to the C corporation. |
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