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Kristen, the president and sole shareholder of Egret Corporation, has earned a salary bonus of $225,500 for the current year. Because of the lower tax
Kristen, the president and sole shareholder of Egret Corporation, has earned a salary bonus of $225,500 for the current year. Because of the lower tax rates on qualifying dividends, Kristen is considering substituting a dividend for the bonus. Assume that the tax rates are 24% for Kristen and 21% for Egret Corporation. Round your answers to nearest dollar, if required. a. How much better off would Kristen be if she were paid a dividend rather than salary? If Kristen were paid a bonus, she would receive $ would receive $ after taxes. If Kristen receives a dividend rather than salary, she after taxes. Thus, she would be better off by receiving the b. How much better off would Egret Corporation be if it paid Kristen a salary rather than a dividend? The net after-tax cost of the bonus for Egret Corporation would be $ be $ . Therefore, Egret would be better off by $ and the net after-tax cost for the dividend would if it paid the c. Assume Egret Corporation paid Kristen a salary bonus of $293,150 instead of a $225,500 dividend. If Egret Corporation were to pay Kristen a salary bonus of $293,150 instead of a $225,500 dividend, Kristen would receive after taxes. The bonus would cost Egret Corporation $ after taxes. d. What should Kristen do? Both Egret Corporation and Kristen are better off with the
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