Kyrsten Haas expects her S corporation to generate a profit of $200,000. What is the effective tax rate on the $200,000 if no cash is distributed? Kyrsten's marginal tax rate on ordinary income is 37%.

Question

Quizplus · Accepted Answer

S corporations pass their profits directly to their shareholders, who then report the income on their personal tax returns. Therefore, the effective tax rate on the $200,000 would be Kyrsten's marginal tax rate of 37%.

Kyrsten Haas Expects Her S Corporation to Generate a Profit