Distributions from a C corp are taxed as follows:
- First, as a dividend to the extent of the corporation earnings and profits
- Earnings and profits are not the same as retained earnings
- Any distributions paid from earnings and profits would be considered a qualified dividend
- Distributions paid in excess of earnings and profits would be tax-free to the extent of the shareholder's capital (basis in the C corporation).
- Finally, distributions paid in excess of the above two items would be taxed as capital gain
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
