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Nancy is a 40% shareholder and president of Robin Corporation, a regular corporation. The board of directors of Robin has decided to pay Nancy a $175,000 bonus for the year based on her outstanding performance. The directors want to pay the $175,000 as salary, but Nancy would prefer to have it paid as a dividend. If both Robin Corporation and Nancy are in a 35% marginal tax bracket irrespective of the treatment of the bonus, discuss which form of payment would be most beneficial for each party. (Ignore any employment tax considerations.)
Fixed Costs
Costs that do not fluctuate with changes in production level or sales volume, such as rent, salaries, and insurance.
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