Answer:
Answer is explained in the explanation section below.
Explanation:
A) No dividends or salary to Sasha:
If no dividends or salary then no net income, hence, no taxable amount.
Company has the taxable income of $350,000.
Corporate tax will be computed by reducing the threshold limit from the taxable income according to the rules of income tax and then tax rate will be applied.
b) Distributes $75000 of dividends to Sasha.
Now, it has got the dividend, now the amount is taxable. It will be taxed on every dividend that Sasha will get during each year.
c) Pays $75000 salary to Sasha:
Now, the Sasha is getting Salary of $75000, it means the total taxable amount of $350,000 will be reduced by the amount of Salary that Sasha is receiving. Now, the balance taxable amount = $350,000 - $75000 = $275000
Amount that Sasha is liable to pay as a tax = $75000 x 39.6% = $29700
So, $29700 is the amount that Sasha will pay as tax for getting her salary of $75000
d) Sole proprietorship and Sasha Withdraws nothing:
In this case, taxable income of Sasha is the profit of the company Azure,
So,
Tax payable = $350,000 x 39.6% = $138,600
e) Sole proprietorship and Sasha Withdraws $75000:
Even in this case, Sasha is liable to pay the tax.
Tax payable = $350,000 x 39.6% = $138,600
