Corporate Tax

Instructions:

"Mr. Pink owns all the shares of XYZ Corporation a subchapter C corp. And leases property to XYZ Corporation. XYZ Corporation has Earnings and Profits of one million dollars for the taxable year 2014 before paying Mr. Pink a salary. XYZ Corporation has cash of $1.2 million and disposable appreciated property with a FMV of $500,000 and a basis of $200,000."

• What is the best way to split income between XYZ Corporation and Mr. Pink to minimize double tax liability? Consider what may be "Constructive Distributions."

• What doctrines apply?

A constructive distribution allows members of the board of directors to take payments in ways other than just cash through property transactions of one form or another. For instance, when a company rents its offices from a shareholder and pays in excess of the office's fair market value, the company's rent is considered a constructive dividend...
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