Problem 5-50 (LO. 4, 8) Kristen, the president and sole shareholder of Egret Corporation, has earned a salary bonus of $30,000 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. 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 $ 22,800 after taxes. If Kristen receives a dividend rather than salary, she 25,500 after taxes. Thus, she would be better off by receiving the dividend Feedback Check My Work Closely held corporations have considerable discretion regarding their dividend policies. In the past, the double tax result provided strong motivation to avoid the payment of dividends. Instead, the incentive was to bail out corporate profits in a manner that provided tax benefits to the corporation. Thus, the question becomes this: Should the corporation or the shareholders benefit? In general, the best strategy considers the tax consequences to both parties