Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

Larissa is the sole owner of Theo Corp., which provides her only source of income. Larissa has always paid herself entirely by drawing dividends from

Larissa is the sole owner of Theo Corp., which provides her only source of income. Larissa has always paid herself entirely by drawing dividends from her corporation. Leslie suggested that as long as Larissa 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 Theo Corp. earns $240,000 all of which she will pay to herself, how much will she take home under each method. Assume a corporate tax rate of 30%, and a personal tax rate of 25% on salary and 15% on dividend income.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started