Question

* More Info Capital Gains and Dividends Capital gains and losses are assigned to baskets. Five possible tax rates will apply to most capital gains and losses: • Ordinary income tax rates (up to 37% in 2018) for gains on assets held one year or less 28% rate on collectibles gains and includible Sec. 1202 gains Preferential tax rates for gains on assets held for more than one year and qualified dividends based on the taxpayer's taxable income and filing status as shown in the following table: Preferencial Rate Single Filing Jointly* Head of Household 0% Up to $38,600 Up to $77,200 Up to $51,700 > $77,200 but not over > $51,700 but not over 15% > $38,600 but not over $425,800 $479,000 $452,400 20% Over $425,800 Over $479,000 Over $452,400 * The corresponding amounts if married filing separately are half of the amounts for filing jointly. The preferential rate is zero for taxable income up to $38,600 if married filing separately. Corporate Income Tax Rates: In a significant change in the corporate tax rate structure, the TCJA revised the corporate tax rates from a graduated rate structure with rates ranging from 15% to 35% to a flat rate of 21%. This revised corporate rate structure applies to tax years beginning after December 31, 2017 000 Print Done

Answer 1

Answer-

	Distributed as dividend	Distributed as Salary
Taxes for Bling	107,100	18,900
Taxes for Oscar	84000	155,400
Total tax liability	$191,100	$174,300

$420,000 dividend. If the $420,000 is distributed to Oscar as a dividend, Bling Corporation would get no deduction for the dividend and would have corporate taxes of $107,100 (510000*21%) based on taxable income of $510,000. Oscar would pay a maximum rate of 20% on the dividend, so the income taxes due by oscar would be $84,000. Thus, the total income taxes would be $191,100 ($107,100 + $84,000).

$420,000 salary. If the $420,000 is distributed to Oscar as a salary, Bling Corporation would be allowed a deduction and the corporation’s taxable income would be $90,000. The corporate tax on $90,000 is $18,900 (90,000*21%). oscar would be required to pay income taxes on the $420,000 at 37%, so the tax would be $155,400. The total income taxes for the year would be $165,900 (147000+18,900)