How to avoid/minimize further tax on distribution of C-corp retained earnings?
by GY2, Performer
- Created: October 12, 2009, 10:21 am
- Updated: January 28, 2013, 11:39 am
I'm trying to figure out how to solve what to me is a tough tax question without having to pay a zillion dollars to an advisor who may or may not know what he is talking about. Any help or advice would be much appreciated.
Say I'm the sole owner of my C-corp which has accumulated some retained earnings which I now need to throw off to avoid the accumulated earnings tax penalty. How to do that is my question.
If I pay myself a dividend, I will lose 15% to qualified dividends tax.
What if the C-corp increased its salary and retirement contribution expenses related to me (as the sole employee) to the point of creating an opertating loss? The actual cash salary and retirement contribution payments would come from my accumulated retained earning.
Say, becuase of the limits on the annual amount of the retirement contribution, it takes me 2-3 years to reduce retained earnings to zero while the C-corp runs operating losses for each of those years.
Question 1: Would this work so far?
If the above would be okay, then at the end of this process, is there a way to use the C-corp's operating losses to offset my personal salary income? I'm thinking about converting the C-corp to an S-corp but I don't know how the operating lossess would be treated in such a conversion.
Question 2: Would this C to S conversion allow me to use the C's operating losses to offset my personal salary income? Would those losses be passed through to my personal taxes?
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