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How much better off would Annette be

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Question - Annette, the president and sole shareholder of Meteor Corporation, has earned a salary bonus of $30,000 for the current year. Because of the lower tax rates on qualifying dividends, Annette is considering substituting a dividend for the bonus. Assume that the tax rates are 28% for Annette and 34% for Meteor Corporation.

Required -

a. How much better off would Annette be if she were paid a dividend rather than salary?

b. How much better off would Meteor Corporation be if it paid Annette a salary rather than a dividend?

c. If Meteor Corporation pays Annette a salary bonus of $40,000 instead of a $30,000 dividend, how would your answers to (a) and (b) change?

Reference no: EM132485302

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