Making distributions to shareholders that are deductible by the C corporation can reduce or eliminate double taxation.

Question

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When a C corporation makes distributions to its shareholders, those distributions are deductible by the corporation as an expense. This means that the corporation can reduce its taxable income by the amount of the distribution, which in turn reduces the amount of corporate income that is subject to corporate taxes. If the distribution is large enough, it can even eliminate double taxation altogether, meaning that the corporation and its shareholders both pay taxes on a smaller amount of income.

Making Distributions to Shareholders That Are Deductible by the C