Corporation Entity Taxation Name: Tian Lou Course: ACC-335 Instructor: S. Singleton Institution: Southern New Hampshire University Introduction: Corporate Entity Taxation The obligation of the Corporation Entity taxation started in the 1909. The corporation entity taxation continues to exist in the US to date. The process of separating business owners from the corporations started in the year 1894 under the revenue act. As a result, the tax rates and taxable income started been incorporated to corporations with the regard of the owners or their statuses. In comparison to the Civil War Tax Acts, it was different since it taxed corporate owners individually, under the individual income tax. In the year 1894, the act was unconstitutional leading to the revival of the individual income tax in the year 1913 (Ting, 2013). The revival of the act occurred after the tax law was amended, eliminating the constitutionality queries that gave raise to a separate individual and corporation entity taxation. There has, however, been a significant cause of concern regarding the legality of corporate and individuals’ taxations being separate because individuals own some corporations directly or indirectly. The concern emanates from the fact that these owners take delivery of a share of the corporation incomes. Therefore, the same income is taxed twice; hence, the challenge of double taxation arises (Macmillan, 2011). Corporate revenue is levied at the corporation entity level and also at the individual/ shareholder level. It occurs payable to the detail that the tax structure perceives the shareholders in addition to the company as distinct entities. The joint levy on corporate revenue would still be high due to the taxation on both levels (Macmillan, 2011). That stands, even in the stipulation that the United States dropped its corporate revenue tax proportion to twenty-five percent. Corporateentitytaxationarises once a tax is enacted on the same asset, transaction or income. Double taxation occurs in the U.S. through the levies paid on income tax as well as the corporate income. However, the same asset is taxed again once profits are dispersed as shares to shareholders.  The issue of double taxation may also transpire on the stipulation that more or two countries tax the same asset. As a result, one perceives that corporate entity taxation is not a legal process since the 1894 process of taxing corporations is not followed. The income from corporations is taxed twice leading to the legality issue separating corporations from individuals. Entity Theory Entities define the process in which the tax is imposed. Corporate taxes occur through the entities been perceived differently from the individuals. The entity theory leads to the development of double corporate income tax as it steers to double taxation (Steven, 2001). The U.S system operates under the dual system for taxing business where both corporations and partnerships receive differing perceptions i.

1. Corporation Entity Taxation
Name: Tian Lou
Course: ACC-335
Instructor: S. Singleton
Institution: Southern New Hampshire University
Introduction: Corporate Entity Taxation
The obligation of the Corporation Entity taxation started in the
1909. The corporation entity taxation continues to exist in the
US to date. The process of separating business owners from the
corporations started in the year 1894 under the revenue act. As
a result, the tax rates and taxable income started been
incorporated to corporations with the regard of the owners or
their statuses. In comparison to the Civil War Tax Acts, it was
different since it taxed corporate owners individually, under the
individual income tax. In the year 1894, the act was
unconstitutional leading to the revival of the individual income
tax in the year 1913 (Ting, 2013). The revival of the act
occurred after the tax law was amended, eliminating the
constitutionality queries that gave raise to a separate individual
and corporation entity taxation.
There has, however, been a significant cause of concern
regarding the legality of corporate and individuals’ taxations
being separate because individuals own some corporations
directly or indirectly. The concern emanates from the fact that
these owners take delivery of a share of the corporation
incomes. Therefore, the same income is taxed twice; hence, the
challenge of double taxation arises (Macmillan, 2011).
Corporate revenue is levied at the corporation entity level and
also at the individual/ shareholder level. It occurs payable to the
detail that the tax structure perceives the shareholders in
addition to the company as distinct entities. The joint levy on

2. corporate revenue would still be high due to the taxation on
both levels (Macmillan, 2011). That stands, even in the
stipulation that the United States dropped its corporate revenue
tax proportion to twenty-five percent.
Corporateentitytaxationarises once a tax is enacted on the same
asset, transaction or income. Double taxation occurs in the U.S.
through the levies paid on income tax as well as the corporate
income. However, the same asset is taxed again once profits are
dispersed as shares to shareholders. The issue of double
taxation may also transpire on the stipulation that more or two
countries tax the same asset. As a result, one perceives that
corporate entity taxation is not a legal process since the 1894
process of taxing corporations is not followed. The income from
corporations is taxed twice leading to the legality issue
separating corporations from individuals.
Entity Theory
Entities define the process in which the tax is imposed.
Corporate taxes occur through the entities been perceived
differently from the individuals. The entity theory leads to the
development of double corporate income tax as it steers to
double taxation (Steven, 2001). The U.S system operates under
the dual system for taxing business where both corporations and
partnerships receive differing perceptions in imposing taxation
rates. The problem arises from the traditional perception, which
stated that corporations, unlike partnerships, ought to pay taxes,
as they are separate entities from the owners.
In addition, the 1864 Tariff Act, perceived both the corporation
and partnership business as channels for the country to earn
income reflecting the corporation view as an aggregate entity
(Ting, 2013). The issue of double taxation arose from the tariff
tax of 1894. It provided a view that the nature of corporations
was different from other business entities. In the late 1860s, the
corporate was not regarded as a separate entity from the
proprietors, the change occurred in the late 19th century.

3. The upsurge of intangible affluence on the separate corporate
entities and the aggregate tax avoidance linked with this
innovative wealth steered the Congress to hunt for substitute
approaches of attaining the revenue of wealthy persons. For its
consistent and open supply of payments, the corporation was an
apparent bull's eye for an extension of stoppage-at-the-source
assemblage struggles that had proved so prosperous throughout
the Civil War in addition to the reconstruction. Thus, the
corporate income tax was alleged to be a necessary device for
relating a wide-ranging structure of separate earnings taxation
(Steven, 2001).
In the facade of increasing liability and a persistent requisite for
funds to aid in funding the warfare struggle, a national revenue
tax was first attained in the year 1862. The 1862 Act enforced a
levy of three percent on the income that existed amongst $600,
as well as $10,000. On the other hand, a five percent duty on
profits in surplus of $10,000. Even though the Act did not
exactly mention revenue from corporate entities profits, it did
enact a form of suppressing the tax on certain dealings.
A tax of three percentages was charged on all shares distributed
and interest compensated by track corporations. In addition, a
parallel tax was levied on all dividends distributed. It occurs on
all surplus amounts added by groups, reliance companies,
savings institutes, and insurance businesses. Despite the
insertion of these provisions in a detached unit, they were
considered as a portion of the income tax (Macmillan, 2011).
Though the coinciding portrayal of an income tax on persons
and a dividend duty on trades would have been planned to levy
a double tax liability, Congress keenly pursued to evade this
consequence. Double taxation was a mainly a complex charge
for cohorts of the earnings tax. One of the keys disquiets
concerning the wide-ranging income tax was that it taxed wealth
that was previously taxed by an additional authority.
In disputing a linked endowment, one archetypal personified

4. these anxieties by stating that the levy was unjust since the
government was attaining tax from the same entity at the same
period (Steven, 2001). Others agreed with the issue, naming the
process as double taxation, which was inappropriate and
required amendments to straighten the issue (Steven, 2001).
Not shockingly, set this anti-double-tax feeling, Congress
passed procedures to diminish the double tax danger in the
commercial setting. Essentially, shareholders and stockholders
were allowed to eliminate taxes on their dividends and interest
from the corporations that previously were taxed under the
Tariff Act. However, it was not a flawless resolution. The toll
was not progressed in contrast to the revenue tax system itself,
and there remained no exception for shareholders with profits
below $600. While the later issue was contentious, 2' mistakes
such as this were infrequent in incidence,' the previous difficult
was partly lessened.
Bout-well, the first representative of Internal Revenue
dispensed a directive initiating the appraisers of the income tax
to evaluate an extra two percent tax on entities. However, it was
enforced to include those with revenue in excess of $10,000 that
attained dividends in addition to interest from taxable
corporations (Steven, 2001). From then, the problems of taxing
corporations’ double have been occurring leading.
The instigated nature of corporations led to the structure, which
still governs the taxation process of businesses today. The
corporate entity taxation process is unjust since it only proves
to attain more funds from the wealthy through taxing them
double. The process of viewing a corporation as separate from
its entities leads to the legality issue. Thelegality issue
identified through separating corporations and individuals leads
to the occurrence of double taxation. A number of individuals
trust that the process of double taxation is biased in reference to
corporate entity taxation. As a result, the government ought to
levy taxes at either the corporate level or individual level, but it
should not levy the same income or asset on both levels

5. (Macmillan, 2011).
On the other hand, those that ascertain that the process of
levying on both levels is just frequently refer to the detail that
the policy of dividends is fixed at the level of the corporate.
Additionally, those that perceive the fairness allege that the
corporation’s concerns on double taxation matters should be
handled through making dividend costs to stockholders.
Businesses such as the entities linked to limited liability and
partnership entities could evade the double taxation process.
However, corporations have no possibly of evading the double-
taxation due to their structure (Ting, 2013).
The corporation entity is taxed in regard to its incomes
(profits). The profit is also used to compensate the
shareholders; the shareholder’s income is taxed again referring
to the dividends they obtain from those incomes. The
objectivity of levying dividends in addition to taxing the
organisation is non-existent. The corporation entity taxation
occurs on the fact that the corporation pays the tax perceived on
the profits it has earned. On the other hand, it pays the tax again
when the dividends paid on the shareholders are taxed leading
to both the corporate and individual levels taxation for the
corporations.
Corporations recompense income levies as distinct entities from
their stockholders, whereas the revenues of a limited entity are
taxed openly to the proprietors and shareholders that share the
taxes on incomes/harms founded on their membership share. On
the other hand, the S corporations are an explicit corporation
that are taxed through the same process of taxing a partnership.
The businesses are not taxed as corporations and receive only
one taxation (Steven1, 2010).
The S corporation incomes are levied on the owners of the
corporations in reference to the individual level of income tax
revenues. In addition, corporate entity taxation may occur over
stakeholders that are also the corporation employees and

6. proprietors of the corporation. That is; the owner or
proprietorship including some shareholders that work in the
corporation also receive a pay as employees. The earned income
is taxed at the systematic individual income tax proportion. On
the stipulation that the corporation recompenses bonuses on the
incomes of the business, the owner ought to wage the levy on
those dividends through using one’s personal levy return.
It ought to be renowned that the Tax Act of 1864 was dared
more than a few times since others considered the double
taxation that occurs on corporations and entities as unjust. The
Supreme Court consistently reinforced the tax. After the
occurrence of the war, the same court professed the tax
unauthorised since it signified direct tax policy on the people,
which was not permitted by the constitution. Throughout the
1930's federal individual taxation on revenue, taxes were by no
means more than 1.4 percentage of GNP. Corporate taxes were
certainly not more than 1.6 percentage of GNP. In the year
1990, those similar taxes as a percentage of GNP remained at an
8.77 and 1.99 rates individually.
The issue regarding corporate tax stands as one of the main
subjects with today’s tax code linked to the economic action,
which was levied more than once (Micheal, 1995). In reference
to the current structure of taxing corporations at two levels. A
business that receives $100 requires one to pay the business
income levy. For instance, on the stipulation that a 25 percent
levy is taxed on the corporate level leading to the after-tax
income of $75 is then distributed to stockholders and levied
again. The consequence of corporate entity taxation is a 46.53%
tax liability on the corporate income level. However, a
resolution to this issue of engaging on double-taxation is to
assimilate the corporate and individual levels of income tax
structures.
Integration merely brands the tax code distinguish that
corporations as well as shareholders are identified as one
taxpayer, not two separate entities. The objective is to ensure
that the corporate income is eventually levied at the bordering

7. tax rate confronted by its stockholders and that the tax load on
corporate asset is condensed. The may occur two customs to
assimilate the tax system. They include a credit allegation in
addition to a dividend assumption. On the stipulation that in
both cases the corporate level income tax is dropped to 25
percent. Though the dividend revenue is levied at the normal
top minimal income tax proportion of 39.6 percent.
CreditImputation
Credit imputation process is a system where the corporation
entities, as well as the shareholder individuals, equally
recompense part of the corporate revenue tax. However, a
stockholder is prearranged as a credit that offsets the levies
previously paid at the corporation level (Micheal, 1995). On the
stipulation that the corporation receives a total of $100 and
salaries the corporate income tax, it permits a $75 after-tax
disbursement.
The stockholder then desires to increase back, or gross-up,
where the taxes of the corporation remain previously paid and
then relates the individual level income tax of 39.6 percentages.
The stockholder formerly obtains a tribute for the amount the
corporation previously salaried ($25). Once both of the
compensated taxes are added, the shareholder level tax as well
as the corporation level pays an operative degree of 39.6
percentages. That is; the $25 tax from the corporation level,
added with the $14.60 from the shareholder level.
DividendDeduction
On the other hand, the second technique to incorporate the
corporate level and individual level income tax is at the process
of dividend deduction. In this structure, corporations are given
an inference in contradiction of corporate taxable revenue for
dividends they recompense out to stockholders. The corporation
earns the $100. On the stipulation that the corporation allocates
all $100 to its shareholders, it ought to subtract it all from the
taxable pay.
By way of $0 in taxable returns, the tax bill ought to be $0 for

8. the corporation level. Once the shareholder obtains the
dividend, which is equivalent to pre-tax profits. It is levied at
the rate of 39.6% on the entire profit of $100. In the close, the
entire tax degree on corporate income will stand at 39.6 percent.
Therefore, the corporate taxation will be taxed one under the
entire process where they are taxed twice (Micheal, 1995).
Despite the fact that both approaches steer to equal
consequences, what individuals understand, varies and that will
lead to indubitable paint where the discernment of the two
structures. Underneath the credit structure, high-income entities
attain tax acclaims, which lessens the actual tax rate of the
stockholder. It would influence the professed progressivity of
the separate level income structure. In disparity, the dividend
charge system upholds the apparent progressivity of the
individual level income duty. However, trade-off stands in that
it brands it as though corporations are compensating less to
their payment deduction.
Integration brands tax more apparent and can convey a lower
the tax load on the process of corporate investment. Though
these structures have a trade-off in view, both of them have
vibrant compensations in the setting of the tax alteration. Both
of these structures lessen the necessity for discrepancy tax tolls
on dividend salary. Dividend revenue can be perceived as
ordinary revenue in the individual level tax charge. These
structures are both apparent. Either as a shareholder, one pays
the tax through their share of the corporate income tax with full
awareness of what the corporation previously paid as a tax. On
the other hand, one may compensate the corporate revenue tax
when the pre-tax payment is fully passed to the individual level
tax. Most importantly, the aggregate levy burden on corporate
revenue can be abridged through addition. The addition will
have expressive profits for the corporation and the entire
economy, which is the final goal of any solemn tax-
restructuring offer.

9. TaxableIncome
Most structures levy income through the specified rates of tax
in addition to the taxable salary as demarcated in the corporate
entity taxation structure. Numerous systems describe the
dutiable income through the reference of net income prior to
income tolls per fiscal declarations arranged beneath locally
acknowledged principles of accounting. Such revenue may be
reduced for revenue issue regarding the exemption of tax.
Additional changes and regulations frequently apply.
A number of systems describe corporate taxable income in the
interior of the tax structure (Ting, 2013). The United States
system describes the corporation’s taxable revenue through the
entire income gross of the entity. That is; the transactions plus
other proceeds are subtracted from the charge of the products
vended in addition to the tax-exempt income. It is less
permissible to the deductions made through tax, deprived of the
payment. However, it occurs once the deduction of applicable
individual level tax. Philosophies for distinguishing revenue
and inferences might differ from monetary principles of
accounting.
Corporate Tax
Corporate tax tariffs usually are the equal for opposing forms of
proceeds. However, countless countries employ tax structures
that have progressed tax rate where corporations with altitudes
of income remuneration an inferior rate of toll. Some tax
systems enforce toll at altered rates for diverse sorts of
corporations.
Tax rates differ about authority. In addition, other countries
have sub-country taxation level authorities that also levy
corporate revenue tax. Some rules also enforce tax at diverse
rates on a substitute tax bases. However, some entities may be
entitled to exemption tax on part or all of their revenue in some

10. authorities. Another challenge of imposing corporate tax arises
from the fact that the corporate form appears in different
entities such as businesses for-profit, charitable organizations,
religious and non-profit firms.
Conclusion
Fortunately, the predicament can be overcome through allowing
corporations to be traverse, untaxed entities, thereby allowing
deductions or credits for dividends and plummeting the rates on
capital gains. The disparity in corporate tax occurs due to the
perception that the entity theory that leads to corporations been
perceived as different entities. The problem of taxing
corporations derives from the origin of the first income
corporate tax to be separated. However, as concluded, the
system is unfair leading to the legality issue perceived in
corporate entity taxation.
References
Macmillan, F. (2011). International corporate law. Oxford: Hart
Publishers.
Micheal, L. (1995). How to Understand Dividend Imputation.
BRW, 100.
Steven, B. A. (2001). Entity Theory as Myth in the Origins of
the Corporate Income Tax. William and Mary Law Review, 447-
465.
Steven1, B. A. (2010). The Rise and Fall of the Post-World War
II Corporate Tax Reform. Law and Contemporary Problems,
207-232.
Ting, A. (2013). The taxation of corporate groups under
consolidation: An international comparison. Cambridge UK:
Cambridge University Press.