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Old 10-04-2009, 06:43 PM
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Double tax in C corp ??? different from Australia??

Hello,

I am an Australian CPA looking to start a company in Nevada. I keep reading about double taxation?

In australia you can make say 100k in profit for the company keep it in retained earnings. The company pays 30% tax so you keep the 70k. When you decide to make a divedend payment to a shareholder then they are taxed at their marginal rate of tax foir the divedend.

So lets say we distribute the 70, and lets assume the shareholder is on the top marginal tax being 50%.

The shareholdert would lodge 100k in their own tax return as income and pay 50k in tax but then then would get a "franking credit" the the value of what the company paid being 30k and hence they would pay only the difference.

I assume it is different in the states? How do companies kjeep retained profits for rainy days and get around double tax when they want to make a distribution?

Thanks


Andrew from aussie tax time



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