sara

whose marginal tax rate on additional earnings is 35 percent on ordinary income and 15 percent on dividends, is the sole owner of the stock in

Premton Corporation. The corporation earned $1.2 million for calendar year 2020 before these items:

Salary to Sara ($15,000 monthly)

$180,000

Tax preferred benefits to Sara (Medical, etc.)

$70,000

The corporate tax rate is a flat 21 percent.

Write a short memo to Sara explaining the tax advantages/disadvantages of the salary and benefits and whether Sara should considering increasing or decreasing

the salary and/or the fringe benefits.

How is any change in these amounts the result of shifting tax consequences? Explain.