Stephanie Is the Sole Shareholder and President of Hawk Corporation

question 190

Essay

Stephanie is the sole shareholder and president of Hawk Corporation.She feels that she can justify at least a $220,000 bonus this year because of her performance.However,rather than a bonus in the form of a salary,she plans to have Hawk pay her a $220,000 dividend.Because Stephanie's marginal tax rate is 35%,she prefers to receive a dividend taxed at 15%.Her accountant,however,suggests a $310,000 bonus in lieu of the $220,000 dividend since Hawk Corporation is in the 34% tax bracket.Should Stephanie take the $220,000 dividend or the $310,000 bonus? Support your answer by computing the after-tax cost of the two alternatives to Hawk and to Stephanie.

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Definitions:

Uterine Tube

Also known as the fallopian tube, it's part of the female reproductive system that carries eggs from the ovaries to the uterus.

Fallopian Tube

A pair of tubes along which eggs travel from the ovaries to the uterus.

Intimacy

A close, familiar, and usually affectionate or loving personal relationship with another person or group, often involving a deep understanding and a sharing of emotional connection.

Isolation

The process or fact of being separated from others, which can be physical, social, or emotional.