You have successfully graduated Conestoga College and have joined a public accounting firm in their tax department. You have been assigned to work on a project with Emily Wilson, one of the firm's newest clients. Ms. Wilson is a wealthy individual, and has come to the firm seeking tax advisory services. Ms. Wilson works full-me as a CFO of a large Canadian grocery store, and has annual employment income in excess of $500,000. Because of this, any additional income that she receives will be subject to a combined federal/provincial income tax rate of 53.5%. In addition, several years ago she began to carry on a business as a sole proprietor selling organic smoothies at small local grocery retailers. Sales have been growing each year, and she is fore casing additional growth in the future. Ms. Wilson anticipates business income of $62,000 for the 2023 taxon year. In her province of residence: - the corporate income tax rate is 3.7% on income eligible for the small business deduction and 11.5% on other corporate income the dividend tax credit is 14.1% of the dividend gross up for non-eligible dividends and 10% for eligible dividends. Ms. Wilson was recently at a social gathering where she spoke with a friend who recently incorporated their sole proprietorship. Her friend said that as a result of incorporating her business she is saving thousands of dollars of tax each year. Ms. Wilson has asked your advice as to whether she should incorporate the business and has setup a meeting with you on Monday next week. In anticipation of the meeting your boss has asked you to prepare the following calculations and analysis in order to give to Ms. Wilson. Prepare a memo to present to Ms. Wilson, with reference to the exhibits containing your calculation as needed. Required: 1. Advise her with respect to any income tax deferral that will be available on income retained by the corporation, assuming that 100% of the aer-tax funds are retained within the corporation, and are not paid out to her personally. 2. Determine any income tax savings that will be available if all the aer-tax income is distributed as taxable dividends. 3. Consider the tax implicands if Ms. Wilson were to receive $12,000 aer-tax: a. Determine the amount that would be required in the way of a salary and in the way of a taxable dividend in order to provide her with aer tax cash of $12,000. b. Which alternate would have the lowest income tax cost to Ms. Wilson and the corporaon? c. Briefly describe any other factors that Ms. Wilson should consider in deciding whether to receive taxable dividends or salary. Part B: You had a successful meeng with Ms. Wilson this past Monday. She has decided to incorporate her business, as incorporang creates a separate legal enty and should provide her limited liability. Her new corporaon is called Clean Smoothies, Ltd. ("CL"). While you were in the meeng with Ms. Wilson she brought up a few new items that you believe require some tax analysis. Notes from the Monday meeng with Ms. Wilson: - Ms. Wilson is looking for advice on how to acquire a vehicle. CL owns a vehicle that Ms. Wilson would like to use personally. In order to save money, she is considering having CL sell her the vehicle for 50% of its fair market value. Ms. Wilson thinks this would be a good way for her to obtain a vehicle, but only at a fracon of the cost compared to if she were to go and buy a vehicle directly from a car dealership. - Ms. Wilson is considering purchasing an interest in Powder Strength, Ltd. (PS), a company that manufactures and distributes protein powder. PS is currently owned 100% by Jerry Li, Ms. Wilson's brother-in-law (i.e. Jerry is married to Ms. Wilson's sibling). Ms. Wilson wants to purchase a 30% interest in PS from Jerry at a fair market value price. PS has been quite successful in the protein powder industry, generang over $700,000 of acve business income last year. Ms. Wilson thinks the acquision in PS would be a good investment, but she does not want to do anything that would impact CL. Your boss has asked you to dra a response to Ms. Wilson which should address the following. Required: 4. Do you agree with Ms. Wilson that having the company sell her the vehicle at 50% of its fair market value is a good idea? Explain the relevant tax rules and your conclusion. 5. Provide Ms. Wilson with your thoughts regarding the tax implicaons of acquiring a 30% interest in PS. Describe the tax implicaons to CL (if any), and why the rules would apply.