I:18-31 S Corporation Versus C Corporation. Consider the following facts:

Rf = Rc = 18%

tc = 21%

tp = 37% for ordinary income

= 20% for capital gains n = 6, 15, or 50 years Other information:

• The corporation is formed with a $10,000 contribution.

• The corporation pays no dividends.

• The entities reinvest their after-tax earnings.

Using the format below, compare after-tax accumulations for each investment horizon.

Should the corporation make the S election for any of these investment horizons?

Years (n)

6 15 50 S corporation (tp = 37% with no QBI ded.)

C corporation (no Sec. 1202 exclusion)

S corporation (tp = 37% (1 – 0.20)

= 29.6% with QBI ded.)

C corporation (100% Sec. 1202 exclusion)