Shelley is the sole shareholder and president of Zeth Corporation (a C company). She feels she is entitled to a $220,000 bonus this 12 months as a result of of her efficiency. Nonetheless, relatively than a bonus in the kind of a wage, she plans to have Zeth pay her a $220,000 dividend. As a result of Shelley’s marginal tax price is 35%, she prefers to obtain a dividend taxed at 15%. Her accountant, suggests a $310,000 bonus in lieu of the $220,000 dividend since Zeth Corporation is in the 34% tax bracket. Ought to Shelley take the $220,000 dividend or the $310,000 bonus? Help your reply by computing the after-tax value of the two alternate options to Zeth and to Shelley. What if Zeth had been an S company? How would your reply change?

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