Abstract

The S corporation models measure the benefit of the avoidance of dividend and capital gains taxes. But just when you might have thought the S corporation debate was about to settle down around this simple concept, we have more to talk about than ever. While traditional S-corporation valuation models acknowledge that the comparison is to the public C-corporation investor, they have been silent as to the distinction between the current dividend and capital-gains-tax rates and that which is part of the equity-risk premium. The distinction—which has been the subject of significant study in the financial literature—is notable and bears further discussion.

The author would like to give special thanks to David Dufendach, CPA/ABV, ASA, Executive Director of Advisory Services, Grant Thornton, LLP, for his assistance an guidance with the preparation of this article.