Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Rover Corporation would like to transfer excess cash to its sole shareholder, Aleshia, who is also an employee. Aleshia is in the 24% tax

image text in transcribed

Rover Corporation would like to transfer excess cash to its sole shareholder, Aleshia, who is also an employee. Aleshia is in the 24% tax bracket, and Rover is in the 21% bracket. Because Aleshia's contribution to Rover's profit is substantial, Rover believes that a $142,800 bonus in the current year is reasonable compensation and should be deductible in full. However, Rover is considering paying Aleshia a $142,800 dividend because Aleshia's tax rate on dividends is lower than the corporate tax rate on compensation. Answer the following questions to determine whether Rover is correct in believing that a dividend is the better choice. a. Regarding taxes, which would benefit Aleshia the most? The $142,800 because after taxes she would have $ the bonus. b. Regarding taxes, which would benefit Rover Corporation the most? The $142,800 because it would save Rover $ from the dividend and $ from in taxes. c. Considering the two parties together, which alternative would provide the most overall tax savings? The $142,800 savings is $ because when the overall effect to both the corporation and the shareholder are considered the net tax

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

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

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

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

Get Started

Recommended Textbook for

International Accounting

Authors: Frederick D. Choi, Gary K. Meek

6th edition

131588141, 978-0131588141

More Books

Students also viewed these Accounting questions

Question

Pooling agreements have been outlawed in all states. True/false

Answered: 1 week ago

Question

What is job enlargement ?

Answered: 1 week ago

Question

what is the most common cause of preterm birth in twin pregnancies?

Answered: 1 week ago

Question

Which diagnostic test is most commonly used to confirm PROM?

Answered: 1 week ago

Question

What is the hallmark clinical feature of a molar pregnancy?

Answered: 1 week ago

Question

Identify the most stable compound:

Answered: 1 week ago