How these payments will affect the tax liabilities of al

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Al is a 25% shareholder and the president of ABC, Inc. The Board of Directors of ABC has decided to pay him an additional $20,000 for the year based on outstanding performance and will pay the $20,000 as a dividend. Jay is a 25% shareholder and the president of JKL, Inc. The Board of Directors of JKL has decided to pay him an additional $20,000 for the year based on outstanding performance and will pay the $20,000 as salary. Both Al and Jay are in the 35% income tax bracket as individual taxpayers. Discuss how these payments will affect the tax liabilities of Al, Jay, and the corporations.

Reference no: EM13143631

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