The Booth

Booth Corporation, a Ccorporation, is owned100% by Ralph

Ralph Cooper

Cooper and had taxable income in 2018

2018 of $ 545 comma 000

$545,000. Ralph

Ralph is also an employee of the corporation. In December

December 2018

2018, the corporation has decided to distribute $ 450 comma 000

$450,000 to Ralph

Ralph and has asked you whether it would be better to distribute the money as a dividend or salary. Ralph

Ralph, a singletaxpayer, is in the 37

37% marginal tax bracket. How would you respond to Booth

Booth Corporation? Consider only income taxes for this problem. (Ralph

Ralph's taxable income exceeds $ 425 comma 800

$425,800.)

LOADING...

(Click the icon to view the tax rates for 2018

2018.)

Calculate the taxes for Booth

Booth and Ralph

Ralph under each option. (For the purpose of thisanalysis, we will only consider the marginal and capital gain rates for Ralph

Ralph. Ignore additional taxes imposed on high incometaxpayers.)

Distributed as dividend

Distributed as salary

Taxes for Booth

Taxes for Ralph

Total tax liability