Chip Dale, your client, is a successful Canadian writer, director and producer of digital media content on YouTube, Instagram and TikTok. Chip carries on business through a digital media production company, Chip Productions Inc. (“Chip Inc.”). Chip is an employee and sole shareholder of the company. Chip Inc. has produced highly successful digital media content over the years, which has led to amassing an audience of over 8 million subscribers on the above-noted platforms.

Chip Inc. has recently purchased a high-end yacht for $3 million. Chip regularly entertains company’s business partners, actors and other digital content creators in the industry. Chip Inc. has secured several profitable business partnerships and collaborations at events hosted on board of the yacht. During his spare time, Chip enjoys sailing the yacht on Lake Ontario.

Based on the above, do you see any tax concern(s)? If yes, what concern(s) and why? What are the potential adverse tax implications to each of Chip and Chip Inc.?