Quail Corporation is a C corporation with net income of $500,000 during 2008.If Quail paid dividends of $70,000 to its shareholders,the corporation must pay tax on $430,000 of net income.Shareholders must report the $70,000 of dividends as income.

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Quail Corporation must pay tax on the $500,000 of corporate net income.Dividends paid are not deductible by the corporation.Shareholders must pay tax on the $70,000 of dividends received from the corporation.This is commonly referred to as double taxation.

Quail Corporation Is a C Corporation with Net Income of $500,000