Invest Through Your Corporation
                     and Deduct 70% of Your Dividends
          
          
               There are numerous incentives for small-business
          owners to manage at least part of their investment
          portfolios through their corporations.  One incentive
          is that corporations are allowed to deduct from gross
          income 70% of the dividends received from other U.S.
          corporations that are subject to U.S. income tax.  (The
          deduction rises to 80% of dividends if your corporation
          owns 20% or more of the corporation paying the
          dividends, and to 100% if the corporations are
          considered "affiliated" under the tax code.)  Dividends
          that exceed the dividends-received deduction can be
          offset by other corporate expenses, including passive
          losses.  In addition, any net investment income should
          be taxed at the regular corporate income tax rates,
          which start at 15%.
               To qualify for the deduction, the corporation must
          hold the dividend-paying stock for more than 45 days. 
          You generally cannot reduce your risk of loss by
          hedging the stock position with options or other
          strategies.  Your dividends-received deduction is
          reduced if you used debt to buy the stock paying the
          dividends.  Ordinary dividend distributions from mutual
          funds qualify for the deduction.
               Consider shifting at least part of your investment
          portfolio to your corporation.  High-income stocks and
          mutual funds might generate a higher after-tax return
          when investments are made through the corporation.  If
          you are selling a business, consider selling the assets
          and keeping the sale proceeds in the corporation.  You
          can take advantage of the dividends-received deduction,
          pay yourself a salary and benefits that can be deducted
          against the investment income, and take advantage of
          low corporate tax rates.
               When most of the corporation's income is earned
          from investments, the personal holding company tax
          might apply.  The tax can be avoided by distributing
          most of the corporation's net income through salary,
          benefits, and dividends.
               For information on forming a corporation in any
          state, write to Incorporation Information Package, 818
          Washington Street, Wilmington DE 19801.