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Unformatted text preview: (1- tax rate) 65% 65% 65% 673,154 1,323,154 1,673,154 Nondeductible wages 1,000,000 After-tax cost of wages 1,673,154 1,323,154 1,673,154 Note: The corporation could offer a fully deductible $1M salary and a performance-based bonus of approximately $1.5M &amp; have the same cash outflow as a $2M salary, some of which is nondeductible. The employee would be better off with the salary &amp; larger bonus. Obviously, the employee would bear the risk of the contingent bonus payment &amp; would have to consider the probability of meeting the performance goals....
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This note was uploaded on 09/09/2011 for the course TAX 6845 taught by Professor Kelliher,c during the Fall '08 term at University of Central Florida.
- Fall '08