Stephen Lee has an unincorporated business that he anticipates will have active business income of

$98,000 for the taxation year ending December 31, 2019. Mr. Lee has employment income in excess of

$800,000 with additional amounts subject to a provincial tax rate of 16 percent. The provincial dividend

tax credit is equal to 4/13 of the dividend gross up for non-eligible dividends. Also in this province, the

corporate tax rate is 3 percent on income eligible for the small business deduction and 15 percent on

other income.

Mr. Lee has asked your advice as to whether he should incorporate this business. Advise him with

respect to any tax deferral that will be available on income left in the corporation and on any tax savings

that will be available if all of the income is paid out in dividends