Quote from MRBRETTONWOODS:
Because the corporate tax rate is 35% while the new individual capital gains rate is at 39.6% + an additional 3.8% Obamacare tax. This would have the short term capital gains rate 43.4%, as occam has pointed out.
So, you would have incentive to keep your assets in the corporation and save the 4.6%+3.8%.
3.8-4.6% savings now...
When it comes time to distribute the funds after winding up the Corp, then you're going to get hit with current year taxes for the corp + long-term cap gains...
And I'm pretty sure long-term cap gains > 4.6%....
Unless you aggressively move it into retirement accounts while the corp is active. That way, you can grow it while avoiding the corp tax and delaying the personal tax...
Another idea is to distribute some as salary and some as dividends as time progresses. Problem you run into there is the IRS not being specific as to what is the "normal" salary for any particular industry. So if the salary is low (like the $15-20K you mentioned), and dividends high (over $15-20K), expect a challenge. The IRS is probably going to say that you should declare $xxK or $xxxK as salary, and a smaller percentage as dividends (less than 100% of salary), especially if you actively manage the corporation...
That's usually a test you'll have to overcome and challenge in tax court. The odds of success are probably remote.
At this point, you need to talk to an acct and/or tax atty. There are a couple of vendors on this site who are CPAs who specialize in the trading industry. Pay the money. The advice you get is worth more than any of our responses...
And if you are achieving big returns on a regular basis, it's time to look into a Big 10 CPA firm, and see if the magic they wrought is greater than the taxes...
