Jennifer Andrews is single and turned 45 years old in 2016. She is the sole shareholder and president of Andrews Supplies, Inc. Andrews Supplies is a calendar year, accrual basis corporation. Jennifer receives a salary of $100,000 plus an additional payment that is to be determined at the end of the year. As of November 1, 2016, Andrews Supplies has a projected taxable income before bonus, but after salary, of $100,000. In 2017, Andrews Supplies will pay Jennifer another $100,000 salary and another lump-sum payment to be determined near year end. It is estimated that the corporation's taxable income before bonus, but after salary, for 2017 will be $150,000. Jennifer has no other income, no deductions, and no dependents in 2016 and 2017.

1.Compute the optimal allocation of Jennifer's year-end payment between 2016 and 2017 given that the sum of the payments for both years equals $100,000. You should set up the problem on a computer spreadsheet using the tax calculator formulas such as those used in Research Project #1. Then experiment with different allocations of the bonus over the two years until you find the alternative that results in the lowest total individual plus corporate tax. The 2016 and 2017 individual tax rate schedules, personal exemption amounts, and standard deductions may be found atwww.irs.gov. One of the most efficient ways to find them is to check form 1040-ES and the related instructions.

2.Recompute the optimal allocation assuming that the sum of the bonus payments for both years equals $200,000

3.What can you say in general about the optimal allocation of the year-end payment between 2016 and 2017? What other considerations not contained in the information presented here come into play in the solution to this problem?

4.Recalculate your optimal allocations in questions 1 and 2 assuming that the lump-sum payment will be a combination of executive bonus and qualified dividend. How much (if any) of each payment each year should be treated as an executive bonus (deductible by the corporation, but included in Jennifer's ordinary income) and how much (if any should be treated as a dividend (not deductible by the corporation, but taxed like long- term capital gains for Jennifer

I just need help answering number 3 and 4.

I attached my answers for 1 and 2.

9,275 37,650 91,150 190,150 413,350 415,050 2016 Tax Rate Schedule X 9,275.00 37,650.00 927.50 91,150.00 5,183.75 190,150.00 18,558.75 413,350.00 46,278.75 415,050.00 119,934.75 120,529.75 Taxable income Income tax 150,000.00 35,036.75 10% 15% 25% 28% 33% 35% 39.60% 35,036.75 - 70,018.50 2016 Corporate Tax Rate Schedule 50,000 50,000 75,000 7,500.00 75,000 100,000 13,750.00 100,000 335,000 22,250.00 335,000 10,000,000 113,900.00 10,000,000 15,000,000 3,400,000.00 15,000,000 18,333,333 5,150,000.00 18,333,333 6,416,667.00 Taxable income Income tax 15% 25% 34% 39% 34% 35% 38% 35% 22,250.00 - 100,000.00 22,250.00 64,000.00 Total Tax 134,018.50 9,325 37,950 91,900 191,650 416,700 418,400 2017 Tax Rate Schedule X 9,325.00 37,950.00 932.50 91,900.00 5,226.25 191,650.00 18,713.75 416,700.00 46,643.75 418,400.00 120,910.25 121,505.25 Taxable income Income tax 150,000.00 34,981.75 2017 Corporate Tax Rate Schedule 50,000 50,000 75,000 7,500.00 75,000 100,000 13,750.00 100,000 335,000 22,250.00 335,000 10,000,000 113,900.00 10,000,000 15,000,000 3,400,000.00 15,000,000 18,333,333 5,150,000.00 18,333,333 6,416,667.00 Taxable income Income tax 150,000.00 41,750.00 10% 15% 25% 28% 33% 35% 39.60% 34,981.75 - 15% 25% 34% 39% 34% 35% 38% 35% 41,750.00 - 9,275 37,650 91,150 190,150 413,350 415,050 2016 Tax Rate Schedule X 9,275.00 37,650.00 927.50 91,150.00 5,183.75 190,150.00 18,558.75 413,350.00 46,278.75 415,050.00 119,934.75 120,529.75 Taxable income Income tax 200,000.00 49,529.25 10% 15% 25% 28% 33% 35% 39.60% 49,529.25 - 98,928.50 2016 Corporate Tax Rate Schedule 50,000 50,000 75,000 7,500.00 75,000 100,000 13,750.00 100,000 335,000 22,250.00 335,000 10,000,000 113,900.00 10,000,000 15,000,000 3,400,000.00 15,000,000 18,333,333 5,150,000.00 18,333,333 6,416,667.00 Taxable income Income tax 15% 25% 34% 39% 34% 35% 38% 35% 22,250.00 - 100,000.00 22,250.00 64,000.00 Total Tax 162,928.50 9,325 37,950 91,900 191,650 416,700 418,400 2017 Tax Rate Schedule X 9,325.00 37,950.00 932.50 91,900.00 5,226.25 191,650.00 18,713.75 416,700.00 46,643.75 418,400.00 120,910.25 121,505.25 Taxable income Income tax 200,000.00 49,399.25 2017 Corporate Tax Rate Schedule 50,000 50,000 75,000 7,500.00 75,000 100,000 13,750.00 100,000 335,000 22,250.00 335,000 10,000,000 113,900.00 10,000,000 15,000,000 3,400,000.00 15,000,000 18,333,333 5,150,000.00 18,333,333 6,416,667.00 Taxable income Income tax 150,000.00 41,750.00 10% 15% 25% 28% 33% 35% 39.60% 49,399.25 - 15% 25% 34% 39% 34% 35% 38% 35% 41,750.00 - 3 In both cases an equal split between the lump sum for the two years yielded the best results taxwise. Some other considerations that might come into play for this problem are whether or not the Company will have a loss one of the years because incomee extimates are just that, estimates. We also have to take into account the companys taxable income when figuring out how much of the bonus will be allocated to a certain year. 4 The portions of the lump sum payment that should be treated as executive bonuses and qualified dividends are as follows. to a certain year. dividends are as follows