MGMT 127B Chapter Notes - Chapter 2: Capital Account, Tax Avoidance, Ordinary Income
Document Summary
Taxation of entity income: corporation income tax applies, marginal tax rates range from 15% to 39% Taxation of withdrawals/distributions from entity: character of entity income and expenses is not retained at the shareholder level. Instead, distributions to shareholders are generally taxed as dividend income: preferential tax rates (0/15/20%) apply to qualified dividends. Employment taxes: compensation paid to shareholder/employees is subject to payroll taxes. Capital gains and losses result from the taxable sales or exchanges of capital assets. Whether these gains and losses are long term or short term depends on the holding period of the assets sold/exchanged. Each year, a taxpayer"s short term gains and losses are combined and long term gains and losses are combined. Then the result is a net short term cap gain/loss and net long term cap gain/loss. Capital gains: corporations receive no favorable tax rate on long term capital gains- it is taxed at.
