You have just incorporated and started your business. Your corporate pre$-$tax profit is $$40,000.$ This is your only source of income. This income is eligible for the Small Business Deduction, and is subject to a $3\%$ provincial tax rate.

Using a $15\%$ dividend gross$-$up rate, a federal dividend tax credit equal to $9/13$ of the gross$-$up and a provincial dividend tax credit equal to $4/13$ of the gross$-$up$,$ determine whether you should receive the corporation$$s income through salary or dividends. Is there a mixture of salary and dividends that is even better? Hint: Try out an option where you pay $$4,276$ as salary and the remainder as dividends.

Assume you have $$2,800$ of federal personal tax credits and $$1,500$ of provincial tax credits before considering dividends, all of which are non$-$refundable. You may use a $15\%$ federal tax rate and a $10\%$ provincial tax rate for your personal tax calculations.