Matt, whose marginal tax rate on additional earnings is 35 percent on ordinary income and 15 percent on dividends, is the sole owner of the stock in Premton Corporation. The corporation earned $1.2 million for calendar year 2020 before these items:

Salary to Matt ($15,000 monthly) $180,000 Tax preferred benefits to Dat (Medical, etc.) $70,000

The corporate tax rate is a flat 21 percent.

1A) Write a short memo to Matt explaining the tax advantages/disadvantages of the salary and benefits and whether Matt should considering increasing or decreasing the salary and/or the fringe benefits.

1B) How is any change in these amounts the result of shifting tax consequences? Explain.