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:

Limbic System

A complex system of nerves and networks in the brain, involved in basic emotions such as fear and pleasure, as well as instincts and mood control.

Medulla

The inner region of an organ or tissue, or specifically, the lower part of the brainstem which is involved in regulating vital body functions such as heart rate and breathing.

Sensory Information

Information processed by the sensory systems, encompassing inputs from senses such as sight, hearing, smell, taste, and touch that is used by the organism to interpret the environment.

Breathing

The process of inhaling and exhaling air to facilitate gas exchange with the internal environment, primarily by bringing in oxygen and flushing out carbon dioxide.