On January 1, 2019, Saul Barkin owns a group of shares with an adjusted cost base of $420,000.While these shares do not pay dividends, he expects that, during the coming year, their fair market value will increase to $640,000.At that point he expects to sell the securities to purchase a sailboat.None of these investments are eligible for the lifetime capital gains deduction.

Saul has employment income in excess of $250,000 and, given this, any additional income will be taxed at a combined federal/provincial rate of 52 percent.

He would like your advice on whether there would be any tax advantages associated with transferring these securities to a corporation.

In his province of residence:

the corporate tax rate is 2.5 percent on income eligible for the small business deduction

the corporate tax rate is 14 percent on other income

the dividend tax credit is 25 percent of the dividend gross up for non-eligible dividends

Required:

Provide the requested advice, including an explanation of your conclusions.

Use the Excel Template provided