By Kenneth H. Bridges, CPA, PFS March 2011
Assume a selling price of $10,000,000, corporate capital gains rates of 34% and 6% for Federal and Georgia, respectively, and individual capital gains rates of 15% and 6% for Federal and Georgia, respectively.
|Selling price||$ 10,000,000||$ 10,000,000|
|Corporate level tax||(4,000,000)||(4,000,000)|
|Shareholder level tax||(2,100,000)||(1,260,000)||(840,000)|
|Net to shareholders||7,900,000||4,740,000||3,160,000|
|Effective tax rate||21%||52.6%||31.6%|
Note: The above analysis assumes that all gain is treated as capital gain as opposed to ordinary income, and assumes no “built-in gains” tax to be incurred by the S-corp.
Kenneth H. Bridges, CPA, PFS is a partner with Bridges & Dunn-Rankin, LLP an Atlanta-based CPA firm.
This article is presented for educational and informational purposes only, and is not intended to constitute legal, tax or accounting advice. The article provides only a very general summary of complex rules. For advice on how these rules may apply to your specific situation, contact a professional tax advisor.