Income Tax Fundamentals: Corporations, Trusts, and Passthrough Entities

What this video covers

• Why C-corporations pay a flat 21% entity-level tax and how double taxation creates an effective rate near 33% when profits are distributed as dividends
• Why S-corporations and partnerships avoid double taxation, and why passthrough income is taxable to owners whether or not cash is actually distributed
• The ownership limits and restrictions that distinguish S-corporations (100 shareholders, one class of stock) from partnerships (unlimited partners, multiple classes)
• Why a limited liability company (LLC) alone never answers a taxation question: single-member default to disregarded entity, multi-member default to partnership, with corporate election available
• Why real estate investment trust (REIT) dividends are taxed as ordinary income rather than at preferential qualified-dividend rates
• Why master limited partnership (MLP) cash distributions generally reduce the partner's cost basis rather than triggering immediate tax, despite the passthrough of entity-level income
• How trusts and estates reach the 37% marginal bracket at just $16,000 of retained income, creating the incentive to distribute income to lower-bracket beneficiaries
• The critical exam distinction between estate income tax (tax on earnings during administration) and estate tax (tax on wealth transfer at death)