> What makes this a particularly easy rule of thumb to follow is that it's exactly what you would do anyways if you didn't know about the S-Corp loophole.
So if everyone is supposed to pretend it doesn't exist, why does it exist?
The tax structure S-Corp owners are taking advantage of is the one that governs investment income. These people are deliberately reclassifying their compensation as return on the investment of having started a business.
So if everyone is supposed to pretend it doesn't exist, why does it exist?