Larry Watts, a Canadian Resident, Owns 49 Percent of the Shares

Larry Watts, a Canadian resident, owns 49 percent of the shares of Zatch Ltd., a Canadian corporation. Laura Marsh, who lives in England, owns the remaining 51 percent. For the current year, the corporation has $150,000 in income, all of which will be paid out as either salary or eligible dividends. Because of other sources of income, Larry is in the 29 percent federal tax bracket and an 18 percent provincial tax bracket. On both eligible and non-eligible dividends, the provincial dividend tax credit is equal to 30 percent of the gross up. Zatch Ltd. pays taxes at a combined federal/provincial rate of 31 percent. With respect to Larry's choice between receiving his share of the after tax corporate income in the form of salary or dividends, which of the following statements is correct?

A) It does not matter whether he receives salary or dividends as he would retain the same after tax amount with either alternative.
B) He should take the salary because he will have more left after tax.
C) He should take the dividends because he will have more left after tax.
D) In order to fully use his personal tax credits, he should receive a combination of salary and dividends.