S corp liquidating dividend hudgens dating zac efron
Note that both of you might pay the 3.8% Obamacare tax on the long-term capital gains and dividends.Note: The rules for determining whether you're active or not and when the net investment income tax applies (aka "Obamacare tax") are discussed in some detail in a blog post I did here.does that mean that I don't pay taxes on S corporation profits? As a shareholder, you pay taxes on your proportionate share of the S corporation's profits.For example, if you and a buddy equally own an S corporation and the S corporation makes 0,000, you will each need to pay the income taxes on your 5,000 shares of the S corporation's profits.
Upon hearing this, some people become confused and say, "Well, that's crazy...
For example, if an S corporation did allocate (per the earlier example) 5,000 of the S corporation profit to you because you're a shareholder, the character of that income matters.
If the income is ordinary income, you pay the ordinary income tax rates.
Second special rule: The 3.8% net investment income tax, also known as the Obamacare tax, never hits the ordinary income that flows out of an S corporation if the shareholder is actively involved in the S corporation.
Note, however, that the 3.8% tax does potentially hit the ordinary income if the shareholder is not actively involved.
And that dividend (because it's paid out of the C corporation's old profits) is taxed to the shareholders.