Suppose Congress is expected to increase the corporate tax rate from 35% to 45% next year. Real Net. Com is scheduled to pay its CEO a salary of $1 million in the current period. The CEO’s tax rate is...

Suppose Congress is expected to increase the corporate tax rate from 35% to 45% next year. Real Net. Com is scheduled to pay its CEO a salary of $1 million in the current period. The CEO’s tax rate is 40%. The CEO is also entitled to a bonus that is up to the discretion of the compensation committee. As an adviser to the compensation committee, compare and contrast the following tax-planning strategies.

a. Do nothing.

b. Defer a large part of the salary ($300,000) from the current period to the next period.

c. Defer the bonus from the current period to the next period.