Homework: Ch$.1$ HW

Question $7,$ Qi:$1-19($similar to$)$

HW Score: $46\mathrm{.}15\%,6$ of $13$ points

Part $1$ of $2$

Points: $0$ of $1$

The Bunting Corporation, a C corporation, is owned $100\%$ by Dave Brown and had taxable income in $2023$ of $$515,000.$ Dave is also an employee of the corporation. In December $2023,$ the corporation has decided to distribute $$420,000$ to Dave and has asked you whether it would be better to distribute the money as a dividend or salary. Dave, a single taxpayer, is in the $37\%$ marginal tax bracket. How would you respond to Bunting Corporation? Consider only income taxes for this problem, and ignore the net investment income tax. $($Dave$\text{'}$s taxable income exceeds $$492,300.)$

Vew the capital gain rates for $2023.$

Calculate the taxes for Bunting and Dave under each option. $($For the purpose of this analysis, we will only consider the marginal and capital gain rates for Dave. Ignore the net investment income tax.$)$

$\backslash$table$[[,$Distributed as dividend,Distributed as salary$],[$Taxes for Bunting,,$],[$Taxes for Dave,,$],[$Total tax liability,,$]]$

Capital Gains Rates

Capital Gains and Dividends

Capital gains and losses are assigned to baskets. Five possible tax rates will apply to most capital gains and losses:

Ordinary income tax rates $($up to $37\%$ in $2023)$ for gains on assets held one year or less

$28\%$ rate on collectibles gains and includible Sec. $1202$ gains

Preferential tax rates for gains on assets held for more than one year and qualified dividends based on the taxpayer's taxable income and filing status as shown in the following table:

$\backslash$table$[[\backslash$table$[[$Preferential$],[$Rate$]],$Single,Filing Jointly$*,$Head of Household$],[0\%,$Up to $$44,625,$Up to $$89,250,$Up to $$59,750$