The use of a corporation as a tax shelter is most effective when the individual tax rate is significantly higher than the corporate tax rate.

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When the individual tax rate is higher than the corporate tax rate, using a corporation as a tax shelter can result in significant tax savings. This is because the corporation can retain profits at a lower tax rate, which can then be paid out to the individual as dividends that are taxed at a lower rate than ordinary income. However, if the individual tax rate is not significantly higher than the corporate tax rate, the tax savings may not be as substantial.

The Use of a Corporation as a Tax Shelter Is