How much better off would Kristen be

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Problem - Kristen, the president and sole shareholder of Egret Corporation, has earned a salary bonus of $30,000 for the current year. Because of the lower tax rates on qualifying dividends, Kristen is considering substituting a dividend for the bonus. Assume that the tax rates are 24% for Kristen and 21% for Egret Corporation.

Required -

a. How much better off would Kristen be if she were paid a dividend rather than salary?

b. How much better off would Egret Corporation be if it paid Kristen a salary rather than a dividend?

c. If Egret Corporation paid Kristen a salary bonus of $35,000 instead of a $30,000 dividend, how would your answers to parts (a) and (b) change?

d. What should Kristen do? Summarize your conclusion in a two- to three- paragraph e-mail to your instructor.

Reference no: EM132645935

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