For the year ending December 31 , 2019, Mortell Inc, a Canadian controlled private corporation, has taxable income before consideration of dividends or salary paid to its sole shareholder of $198,000. The company's cash balance is over $200,000. It is subject to a combined federal/provincial tax rate of 12%. Mrs Mortell, the company's only shareholder, has employment income of $150,000., and normally does not take any further money out of her corporation. However, she needs an additional $30,000 in cash to generate a home theatre of her dreams. Mrs Mortell's combined federal/provincial tax rate on additional income is 45%. She lives in a province where the provincial dividend tax credit is equal to 25% of the dividend gross up for non eligible dividends. She has asked your advise as to whether the payment of salary, or alternatively,the payment of non eligible dividends would have the lowest tax cost.

Dividend gross up on non eligible dividends is 15%, federal dividend tax credit is equal to 9/13;

Dividend gross up on eligible dividends is 38%, federal dividend tax credit is equal to 6/11

Provide the requested advice