How do I make a rabbit shape around an edge?

I am a new user and having problems creating a rabbit around an object. I have included a jpg. It shows a box around the edge i want the shape cut out of. Beside that an "L" shape to represent 0.125 x 0.125. I would like to know how to cut the "L" shape out all around the top edge of the object. In the wood shop I'd call this a rabbit. One method I came up with was to offset all the edges in 0.125 as a sketch then extrude the sketch up 0.125. This didn't work because I couldn't get holes to cut through the two individual surfaces. I think there may be a way to join the two pieces then cut the holes but I haven't figured it out. Thanks in advance for any help.