Assume the scenarios that follow with respect to the shareholder of a CCPC$.$

View the assumptions.

Required

Using these assumptions, indicate whether integration is working perfectly. If your answer is no$,$ briefly explain why this is the case. Also, discuss whether there is a possible deferral opportunity from incorporating even though integration may not be working properly.

The provincial dividend tax credit is below the rate required for perfect integration. The combined corp below the rate that is required to achieve perfect integration.

Work on calculating the income taxes on the income when flowed through the corporation. In this step, c

Business income for the year

Corporate taxes $(17\%)$

Income available for taxable dividends

Assumptions

The corporation's business income for the year is $$50,000.$

Any taxable dividends paid are non$-$eligible dividends.

The individual's marginal income federal tax rate is $33\%,$ and the marginal provincial income tax rate is $16\%.$

The provincial dividend tax credit is equal to $(413)$ of the gross up$.$

The combined federal and provincial corporate income tax rate is $17\%.$

Use the table below to calculate the taxable dividends.

Dividend income

Gross up

Taxable dividends

Next, find the personal tax payable on the dividends. $($Round your answers to the nearest whole dollar.$)$

Income tax payable before dividend tax credit

Dividend tax credit

Personai income tax payable

Calculate the total income taxes when the income is flowed through a corporation. $($Round your answers to the nearest whole dollar.$)$

Corporate income tax

Personal income tax

Calculate the total income taxes when the income is flowed through a corporation. $($Round your answers to the nearest whole dollar.$)$

Corporate income tax

Personal income tax

Total income tax

Next, calculate the income taxes on the income when earned directly by the individual.

Business income for the year

Combined federal$/$provincial income tax rate

Personal income tax payable

Which one is correct?

A$.$ Incorporating in this case is advisable. The income taxes on the income flowing through a corporation is less than income taxes on the income flowing through the shareholder, and incorporation provides the business with a tax deferral.

B$.$ Incorporating in this case is not advisable. The income taxes on the income flowing through a corporation is less than income taxes on the income flowing through the shareholder. A tax deferral from incorporating the business provides the business with additional funds to grow, assuming the individual has no immediate need for these funds.

C$.$ Incorporating in this case is not advisable. The income taxes on the income flowing through a corporation is no different than the income taxes on the income flowing through the shareholder. However, there are additional taxes from incorporating the business, which will hurts the business' cash flow.

D$.$ Incorporating in this case is advisable. The income taxes on the income flowing through a corporation is less than income taxes on the income flowing through the shareholder, but there is no tax deferral.

Finally, calculate the amount of the income tax deferral.

Business income for the year Income tax deferral rate Income tax deferral