The letters from Messrs. Harris and O'Connell (Letters, March) concerning the article on S corporations (Financial Tactics, December 1983) are both technically correct. However, they tend to oversimplify the fault they attribute to the original article.
Mr. Harris's calculations, while correct, ignore the time value of the earnings left in the corporation until they may be withdrawn at capital gains rates at some point in the future. Consequently, the real difference is much greater than $17,800.
Mr. O'Connell's conclusions are those generally held by many practitioners, but again cannot be applied on such a broadbrush basis.
The point that should be made is that S-corporation status must be thoroughly evaluated from all sides by each entity considering whether the election will be beneficial. There is no single set of criteria that can be applied in all situations.