Information

Bob (from Florida) age 60 single retired from IBM

401k = $690,000

business he wants may make taxable income = $300,000

Personal Wealth = $14,000,000

*interest income = $20,000

*dividend income = $6,000

*Land = $9,000,000 (bought in 1966 for $450,000)

may possibly transfer 40% interest to daughter Mandy age 23 single

Question

Explain whether or not the client and his child should take a salary or cash distribution according to tax purposes and Internal Revenue Code and Treasury regulations. Consider the type of business and the tax effect whether it is salary, dividends, or cash withdrawal.