Shirley wants to decide whether it makes sense for her to invest her money personally or via a corporation. She has the following income

Interest income: $5,000

Required:

Using the Rates below, indicate to Shirley

a) How much taxes she would pay personally

b) How much taxes she would pay if the income flowed through the corporation

c) Determine if there is a tax cost or tax savings if she invested personally versus in the corporation, and how much

d) Determine if there is a prepayment or a deferral of taxes when the corporation is used, and how much

Show all your work.

Rates To Use

	Capital Gain	Interest	Non-Eligible Dividends	Eligible Dividends
Dividend Gross Up			15%	38%
Personal Tax Rate	50%	50%	50%	50%
Part 1 Tax	40%	40%	40%	40%
Additional Refundable Tax (ART)	10.67%	10.67%	10.67%	10.67%
Dividend Refund on Investment Income	30.67%	30.67%	30.67%	30.67%
Part IV Tax	38.33%	38.33%	38.33%	38.33%