Maroon Company Had $150,000 Net Profit from Operations in 2010

question 101

Essay

Maroon Company had $150,000 net profit from operations in 2010 and paid Bobbie,its sole shareholder,a dividend of $108,250 ($150,000 net profit - $41,750 corporate tax).Assume that Bobbie is in the 35% marginal tax bracket.Would Bobbie's tax situation be better or worse if Maroon Company were a proprietorship and Bobbie withdrew $108,250 from the business during the year? Explain.

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Definitions:

Physiological Arousal

Physical states of alertness and activation resulting from activation of the central nervous system, often in response to stimuli.

Parasympathetic Nervous System

The part of the autonomic nervous system that calms the body.

Sympathetic Nervous System

The part of the autonomic nervous system that arouses the body to mobilize it for action and thus is involved in the experience of stress.

James-Lange Theory

The theory that emotion results from physiological states triggered by stimuli in the environment.