The Value Of Enterprise And Trade

1838 Words Apr 2nd, 2016 8 Pages
Today’s economy was founded upon the fundamentals of capitalism and continues to find its strength in the presence of freedom of enterprise and trade. Regulation and taxes are vital in order to support fairness amongst businesses and to provide funds for the government to develop and maintain the country’s infrastructure. Most companies distribute some of the company’s accumulated profits, so that is why it is important to characterize the distribution under whether it is deductible or not. As there are many different types of distributions, it is necessary for the tax paying entity to understand the distribution so that each type can be deducted appropriately. Before we can get into what type of distributions that a company distributed, we must look at what a distribution is and how it can help the shareholders. If the business is operated as a C corporation, the company can distribute its after-tax profits to its shareholders in the form of a dividend, stock redemption, or partial liquidation. On the other hand, if a shareholder also serves in some other capacity in the business, the company may be able to distribute its before-tax profits to this person in the form of compensation, interest, or rent (IRS, 2016). There are specific tax consequences depending on whether or not you are able to deduct the amount paid in computing taxable income.
Property Distributions Property distributions are anything applicable with respect to distribution of money and other property.…
Open Document