T incorporated his candy business as a C corporation.Several family members work for the corporation.Which technique will not avoid double taxation?

Question

Quizplus · Accepted Answer

Paying dividends to family shareholders will not avoid double taxation because the corporation will already have paid taxes on the profits before distributing them as dividends.

Additionally, Option A (employing family shareholders and paying them reasonable salaries) and Option B (loaning money to the corporation and receiving fair market interest) may help reduce the corporation's taxable income and therefore decrease the amount of double taxation. Option D (leasing land to the corporation) may also provide rental income that can offset some of the corporation's profits and reduce the amount of double taxation. However, Option C is the only one that will not avoid double taxation.

T Incorporated His Candy Business as a C Corporation