Quinn's proprietorship earned $160,000 in pre-tax profits this year. Quinn does not require personal funds from the business.

Personal tax rates (federal plus provincial) in Quinn's province are:

On the first $49,00020%On the next $48,00030%On the next $54,00040%On the next $63,00045%On income over $214,00050%

(Allratesareassumedforthisquestion.)

The combined federal and provincial rate of tax for Canadian-controlled private corporations in Quinn's province is 13% on the first $500,000 of income.

Quinn has been considering incorporating the business.

Required:

A. Calculate the after-tax profits for the business as i) a proprietorship, and ii) a corporation. Show all calculations.

B. Name the type of tax planning that Quinn would be engaging in if the company was changed from a proprietorship to a corporation.