Question
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
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% |
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