Blue, Inc., has taxable income before salary payments to its president of $700,000 in 2014. Blue is in the 34% tax bracket, and the president is in the 35% tax bracket.
a. Calculate the tax liability to Blue if the president's salary is $400,000 and if it is $100,000.
b. What tax benefit is there of paying the larger salary to the president?
c. What negative tax result may occur associated with the payment of the higher salary?

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The Answer of Blue, Inc., has taxable income before salary payments to its president of $700,000 in 2014. Blue is in the 34% tax bracket, and the president is in the 35% tax bracket.
a. Calculate the tax liability to Blue if the president's salary is $400,000 and if it is $100,000.
b. What tax benefit is there of paying the larger salary to the president?
c. What negative tax result may occur associated with the payment of the higher salary?

Blue, Inc, Has Taxable Income Before Salary Payments to Its President