A nonliquidating

it is governed not by section 301 but rather by section 302.

Instead of applying ordering rules, the tax effect of a redemption is rather more straightforward: the distribution is simply deemed the consideration for the shareholder’s stock.

When the corporation sells the building, however, the distinction between ordinary income and capital gain is mostly lost at the corporate level as there are no differences in rates for corporations, and the dividend income accruing to the shareholder is considered ordinary.

Given the extra taxation at the corporate level and the differences in rates on ordinary income versus capital gain at the shareholder level, the overall amount of tax may have doubled even if the amount of taxable income did not.

Recall, however, that it sold the building for

Recall, however, that it sold the building for $1,000,000, so after paying the tax the corporation should now have $820,000 in cash in the bank.

Under the Internal Revenue Code of 1954, the corporation is aseparate taxable entity, so that corporate income is taxed to thecorporation and dividends paid by the corporation are taxable to theshareholders.

The framework for the taxation of corporate distributionsis provided by Sections 301 (a), 301 (c), and 316 of the Code.

The corporation might distribute property to a shareholder in exchange for all or some of his stock (a “redemption”), or the corporation might dissolve completely and its existence cease (a “liquidation”).

Although either one of these events is still a “distribution,” they cannot produce dividends to the shareholder as neither of them is considered “from E&P.” Nevertheless, the double-taxation inherent in corporate taxation persists even in these events.

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Recall, however, that it sold the building for $1,000,000, so after paying the tax the corporation should now have $820,000 in cash in the bank.Under the Internal Revenue Code of 1954, the corporation is aseparate taxable entity, so that corporate income is taxed to thecorporation and dividends paid by the corporation are taxable to theshareholders.The framework for the taxation of corporate distributionsis provided by Sections 301 (a), 301 (c), and 316 of the Code.The corporation might distribute property to a shareholder in exchange for all or some of his stock (a “redemption”), or the corporation might dissolve completely and its existence cease (a “liquidation”).Although either one of these events is still a “distribution,” they cannot produce dividends to the shareholder as neither of them is considered “from E&P.” Nevertheless, the double-taxation inherent in corporate taxation persists even in these events.

,000,000, so after paying the tax the corporation should now have 0,000 in cash in the bank.

Under the Internal Revenue Code of 1954, the corporation is aseparate taxable entity, so that corporate income is taxed to thecorporation and dividends paid by the corporation are taxable to theshareholders.

The framework for the taxation of corporate distributionsis provided by Sections 301 (a), 301 (c), and 316 of the Code.

The corporation might distribute property to a shareholder in exchange for all or some of his stock (a “redemption”), or the corporation might dissolve completely and its existence cease (a “liquidation”).

Although either one of these events is still a “distribution,” they cannot produce dividends to the shareholder as neither of them is considered “from E&P.” Nevertheless, the double-taxation inherent in corporate taxation persists even in these events.