Problem of double taxation

Reference no: EM131007461

Jill Meier is the sole owner of Meier Corp., which provides her only source of income. Jill has always paid herself entirely by drawing dividends from her corporation. A friend suggested that as long as she is earning about what she would have to pay someone else to run the business, she might be better off paying herself a salary instead of dividends, because she would avoid the problem of double taxation. If Jill's company earns $120,000 all of which she will pay to herself, how much will she take home under each method? Assume a corporate tax rate of 30%, a personal tax rate of 25% and a 15% tax on dividends.

Reference no: EM131007461

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