John Edwards: Corporate Tax Evader

Raleigh (N.C.) News & Observer ^ | september 9, 2003 | Rob Christensen

[TommyDale]

In 1995, Edwards set up a professional corporation that became an issue in his Senate Campaign.

Edwards was the sole employee and sharholder of the corporation, which derived its income from his legal fees. He paid himself a salary of $600,000 in 1996 and $540,000 in 1997, according to personal financial disclosure statements that Senate candidates must file. At the same time, he collected at least $5 million each year in dividends from his corporation.

Edwards was required to pay Medicare taxes on his salary but not on the dividends from his "S" corporation, saving the 2.9 percent Medicare tax on at least $10 million in earnings, or $290,000.

[TommyDale]

This is interesting. When I set my company up, I was told by my attorney/CPA that the IRS would closely scrutinize any dividends over 30% of the total income of the corporation. Double standard for Democrat attorneys?

[TommyDale]

Sorry. The complete URL should be the following:

http://www.news-observer.com/front/story/2852555p-2632282c.html

[ccmay]

Typical lawyer scum, gaming the system to line his own pockets.

We have to break the back of these filthy pirates. We need tort reform that will force hundreds of thousands of lawyers out of work.

-ccm

[jmaroneps37]

opie is an idiot who will slither back into a courtroom in Jan 05.

[jmaroneps37]

opie is an idiot who will slither back into a courtroom in Jan 05.

[Busywhiskers]

I hate the thought of defending a Democrat but this does not look like "Corporate Tax Evasion", rather it looks like good tax planning. S Corporations are flow through entities like partnerships--they pay no taxes. The taxes on the income is paid by the shareholders who are allocated a portion of the corporate income based on their percentage of ownership and they include it on their personal income tax returns and pay personal income tax on it. The law allows the corporation to make distributions of the S-corps income to the shareholders. How else would they have the cash to pay the taxes. The whole idea of S-Corporations is eliminate the double taxation on corporate income. If Edwards is effectively using the provisions to "avoid", (not evade), taxes, GOOD FOR HIM.

[talleyman]

If he collected $5 mil per year in distributions (not "dividends" - dividends arise from C-Corp earnings & profits), he would have had to have an average equivalent amount of pass-through income each year(taxable to him individually). Otherwise, distributions in excess of basis would produce taxable capital gains. Unfortunately, it doesn't seem as though the author of this piece is knowledgeable about such matters.

[mabelkitty]

Spread it around for the good of society bump.