Answer:
Nashida is a C corporation. C corporation is still a small business but it shows the characteristics of entity concept. It is a separate entity different from its owners. It is taxed differently from its owners(Devi)
Devi's gross share of dividend is 20% of $80,000 dividend equals $16,000.
Therefore, devi's gross income if it is a C corporation equals $60,000 + $30,000 + $16,000
=$106,000.
Nashida is an S corporation is a limited and it is more attractive to a small business owner.
Devi is taxed separately on its gross income likewise other shareholders.
Devi is taxed on the following:
1. He will be taxed on $90,000($60,000 + $30,000)
2. He will also be taxed on $40,000($200,000 x 20%)
So he will taxed on his total gross income of $130,000($90,000+$40,000).
The $16,000 of dividend will not be taxed because it is a distribution of capital.
Explanation:
