Double taxation

In the U.S. C-corporation context, income can be taxed at the company level and again when distributed as taxable dividends to shareholders. The result depends on tax classification and applicable rules.

Double taxation in round numbers

Hypothetical: a U.S. C corporation earns US$10m before tax, pays applicable corporate tax and distributes after-tax earnings as taxable dividends. Shareholder tax may then apply; no tax rates or net proceeds are assumed here.

Source: IRS Publication 3402: LLC tax classifications.

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