Rover Corporation would like to transfer excess cash to its sole shareholder, Aleshia, who is also an employee. Aleshia is in the 24% tax bracket, and Rover is in the 21% bracket. Because Aleshia's contribution to Rovers profit is substantial, Rover believes that a $130,800 bonus in the current year is reasonable compensation and should be deductible in full. However, Rover is considering paying Aleshia a $130,800 dividend because Aleshias tax rate on dividends is lower than the corporate tax rate on compensation.
Answer the following questions to determine whether Rover is correct in believing that a dividend is the better choice.
a. Regarding taxes, which would benefit Aleshia the most? The $130,800 because after taxes she would have $fill in the blank 2 from the dividend and $fill in the blank 3 from the bonus.
b. Regarding taxes, which would benefit Rover Corporation the most? The $130,800 dividend because it would save Rover $fill in the blank 5 in taxes.
c. Considering the two parties together, which alternative would provide the most overall tax savings? The $130,800 because when the overall effect to both the corporation and the shareholder are considered the net tax
Emily spent $171,200 to rehabilitate a certified historic building (adjusted basis of $111,280) that originally had been placed in service in 1935.
What is Emily's rehabilitation expenditures tax credit?
