Bush's No Dividend Tax on small companies?

Discussion in 'Taxes and Accounting' started by cashonly, Jan 6, 2003.

  1. sammybea

    sammybea

    bottom line.. can i set up a corp, trade through it.. and pay myself dividends thus avoiding taxable income.
     
    #21     Jan 8, 2003
  2. cashonly

    cashonly Bright Trading, LLC

    Ahhhh... Yes, but will the new law be just for publicly traded companies or all companies?
     
    #22     Jan 8, 2003
  3. Minime

    Minime

    Tax reductions to a point can lead to increased taxes coming into the government via improving commerce (1980's under Reagan for example). I agree our national debt needs taken care of, as well as our annual trade deficit. The government needs to get back to its original purpose of providing for our defense and killing foreign adversaries with drones.
    :D
     
    #23     Jan 8, 2003
  4. Minime

    Minime

    You could do that if dividends aren't taxed. But your corporation will still have corporate tax at 15% for the first $50,000 and then 25% for the next $25,000, then 34% the next 25K, and 39% above that (thanks to Clinton). So you would need to pay yourself a salary to reduce the corporate taxes. Ideally you could leave $50,000 in the corporation and pay 15% corporate tax, and then pay out the balance as salary, hopefully keeping your personal rate somewhere between 15-28%. This would lower your overall tax bill in the end by lowering your average tax rate. Your accumulated earnings could then be drawn out via dividend tax free. They will probably close the closesly-held corporation loophole and dissallow this scheme, making only publicly held corporations subject to tax free dividend treatment.
     
    #24     Jan 8, 2003
  5. cashonly

    cashonly Bright Trading, LLC

    How would it work with an S-Corp?
     
    #25     Jan 8, 2003
  6. #26     Jan 9, 2003
  7. taxman

    taxman

    S-Corps are pass-through, so the proposed legislation will have no effect.

    For any other entity taxed as a corporation for U.S. Federal income tax purposes, a tracing and segregation concept will apply. If a corp finishes the year with taxable income and pays tax on that income then it is booked into a special account. Any dividends paid out of that account will not be taxed again in the hands of the shareholder. This bookkeeping measure is necessary to ensure that income does not escape tax entirely.

    A number of anti-abuse measures are currently being considered, but curiously the legislation allows corps to book "taxed income" to the special account and then offset the actual tax liability with foreign tax credits -- a big loophole.
     
    #27     Jan 9, 2003
  8. wild

    wild

    Mr Bush is hoping that his tax cuts will give consumer spending another boost, meaning the economy can continue to defy gravity for a while longer.

    It may well do - but as the deficits get larger, the danger of a sudden implosion will become greater. It is not possible to allow the trade deficit, which is already more than 5% of GDP, to keep expanding for ever. Sooner or later, investor confidence will be punctured and international money - which has been financing the deficit - will flow out like a tidal wave. Ditto for consumer debt.

    more at http://www.guardian.co.uk/economicdispatch/story/0,12498,871382,00.html

    regards

    wild
     
    #28     Jan 9, 2003