Tag: C-Corporation

Avoiding Dividend Reclassification: Key Tax Takeaways for Closely Held C-Corporations | Clary Hood, Inc. v. Commissioner, 69 F.4th 168 (4th Circuit)

Posted on by Praestans Global Advisors

This case highlights the need for C corporations to have a dividend policy and history. It also highlights the need to carefully consider the compensation paid each year to the shareholder-employee of a closely held corporation to have better support of reasonable compensation in order to avoid the recharacterization of deductible compensation to nondeductible dividend distributions. It would likely have been tax advantageous for the Taxpayer to be an S corporation. […]

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