Question
Suppose Congress is expected to increase the corporate tax rate from 35% to 45% next year. RealNet.com is scheduled to pay its CEO a salary
Suppose Congress is expected to increase the corporate tax rate from 35% to 45% next year. RealNet.com is scheduled to pay its CEO a salary of $1million in the current period. The CEOs tax rate is 40%. The CEO is also entitled to a bonus that is up to the compensation committee. As an adviser to the compensation committee, compare and contrast the following tax-planning strategies.
1. Do nothing.
2. Defer a large part of the salary ($300,000) from the current period to the next period.
3. Defer the bonus from the current period to the next period.
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