The Bling Corporation, a C corporation, is owned 100% by Sam Kline and had taxable income in 2020 of $545,000. Sam is also an employee of the corporation. In December 2020, the corporation has decided to distribute $460,000 to Sam and has asked you whether it would be better to distribute the money as a dividend or salary. Sam, a single taxpayer, is in the 37% marginal tax bracket. How would you respond to Bling Corporation? Consider only income taxes for this problem, and ignore the net investment income tax. (Sam's taxable income exceeds $441,450.) (Click the icon to view the capital gain tax rates for 2020.) C. Calculate the taxes for Bling and Sam under each option. (For the purpose of this analysis, we will only consider the marginal and capital gain rates for Sam. Ignore the net investment income tax.) Distributed as dividend Distributed as salary Taxes for Bling More Info Taxes for Sam Total tax liability Single Capital Gains and Dividends Capital gains and losses are assigned to baskets. Five possible tax rates will apply to most capital gains and losses: Ordinary income tax rates (up to 37% in 2020) for gains on assets held one year or less 28% rate on collectibles gains and includible Sec. 1202 gains Preferential tax rates for gains on assets held for more than one year and qualified dividends based on the taxpayer's taxable income and filing status as shown in the following table: Preferencial Rate Filing Jointly* Head of Household 0% Up to $40,000 Up to $80,000 Up to $53,600 15% > $40,000 but not over $441,450 > $80,000 but not over $496,600 > $53,600 but not over $469,050 20% Over $441,450 Over $496,600 Over $469,050 The corresponding amounts if married filing separately are half of the amounts for filing jointly. The preferential rate is zero for taxable income up to $40,000 if married filing separately. Corporate Income Tax Rates: In a significant change in the corporate tax rate structure, the TCJA revised the corporate tax rates from a graduated rate structure with rates ranging from 15% to 35% to a flat rate of 21%. This revised corporate rate structure applies to tax years beginning after December 31, 2017 Print Done The Bling Corporation, a C corporation, is owned 100% by Sam Kline and had taxable income in 2020 of $545,000. Sam is also an employee of the corporation. In December 2020, the corporation has decided to distribute $460,000 to Sam and has asked you whether it would be better to distribute the money as a dividend or salary. Sam, a single taxpayer, is in the 37% marginal tax bracket. How would you respond to Bling Corporation? Consider only income taxes for this problem, and ignore the net investment income tax. (Sam's taxable income exceeds $441,450.) (Click the icon to view the capital gain tax rates for 2020.) C. Calculate the taxes for Bling and Sam under each option. (For the purpose of this analysis, we will only consider the marginal and capital gain rates for Sam. Ignore the net investment income tax.) Distributed as dividend Distributed as salary Taxes for Bling More Info Taxes for Sam Total tax liability Single Capital Gains and Dividends Capital gains and losses are assigned to baskets. Five possible tax rates will apply to most capital gains and losses: Ordinary income tax rates (up to 37% in 2020) for gains on assets held one year or less 28% rate on collectibles gains and includible Sec. 1202 gains Preferential tax rates for gains on assets held for more than one year and qualified dividends based on the taxpayer's taxable income and filing status as shown in the following table: Preferencial Rate Filing Jointly* Head of Household 0% Up to $40,000 Up to $80,000 Up to $53,600 15% > $40,000 but not over $441,450 > $80,000 but not over $496,600 > $53,600 but not over $469,050 20% Over $441,450 Over $496,600 Over $469,050 The corresponding amounts if married filing separately are half of the amounts for filing jointly. The preferential rate is zero for taxable income up to $40,000 if married filing separately. Corporate Income Tax Rates: In a significant change in the corporate tax rate structure, the TCJA revised the corporate tax rates from a graduated rate structure with rates ranging from 15% to 35% to a flat rate of 21%. This revised corporate rate structure applies to tax years beginning after December 31, 2017 Print Done