No, you did not quite understand me properly. With an S Corporation, distributions are not taxable to the shareholder. Each shareholder pays taxes are ordinary rates on his or her share of the profits – regardless of whether distributed. S Corporations do not pay dividends.
No, you did not quite understand me properly. With an S Corporation, distributions are not taxable to the shareholder. Each shareholder pays taxes are ordinary rates on his or her share of the profits – regardless of whether distributed. S Corporations do not pay dividends. Qualified dividends are defined by the IRS in Publication 550 as follows: “Qualified dividends are the ordinary dividends that are subject to the same 5% or 15% maximum tax rate that applies to net capital gain. They should be shown in box 1b of the Form 1099-DIV you receive. Qualified dividends are subject to the 15% rate if the regular tax rate that would apply is 25% or higher. If the regular tax rate that would apply is lower than 25%, qualified dividends are subject to the 5% rate. To qualify for the 5% or 15% maximum rate, all of the following requirements must be met. The dividends must have been paid by a U.S. corporation or a qualified foreign corporation. (See Qualified foreign corporation later.) The divi
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