Nigel Broadhouse, age $45,$ is a successful dermatologist. His medical practice is conducted

through a professional corporation, Nigel Broadhouse MD Professional Corporation $($PC$).$ Nigel

owns all the shares of NBPC$.$ Nigel$$s wife Beatrice is $42.$ They have two children $$ Harry age $20$

and Diana age $15.$

A number of years ago Nigel incorporated NB Management Inc $($Management$).$ Management is

owned as follows:

Beatrice Harry Diana $100$ Class A common shares

$100$ Class B common shares

$100$ Class C common shares

Beatrice and Harry used their own money to buy their shares for $$100.$ However, as

Diana did not have money of her own, Nigel gifted her the $$100$ needed to buy her

shares.

Management handles all the administrative tasks for PC and receives a management

fee from PC for this of approximately $$350,000$ per year. Beatrice works in

Management, at least $20$ hours per week on average. Harry and Diana do not work in

the business. PC$$s net income is at least $$1,000,000$ annually after deducting the

management fee to Management.

Mr$.$ Partner would like you to provide him with an analysis of the following:

$1.2.3.$ How is the income in PC taxed?

How is the income in Management taxed?

What are the tax implications to each of Beatrice, Harry and Diana if they are

paid dividends from Management?