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What problem may Paul have created by making the S election

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Problem - Paul, who is in the 24% tax bracket, is the sole shareholder of a corporation and receives a salary of $60,000 each year. To avoid double taxation, he makes an S election for the corporation. The corporation currently is earning $100,000, and he expects earnings to grow at a rate between 15% and 20% per year. The earnings are reinvested in the growth of the corporation, and no plans exist for distributions to Paul. What problem may Paul have created by making the S election?

Reference no: EM132649378

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