Wanda Ho Has Employment Income in Excess of $300,000 Per

Wanda Ho has employment income in excess of $300,000 per year. Because of this, any additional income that she receives will be subject to a combined federal/provincial tax rate of 51 percent. Several years ago, she established an unincorporated business that she anticipates will have active business income of $142,000 for the taxation year ending December 31, 2020.
In her province of residence:
• the corporate tax rate is 2.5 percent on income eligible for the small business deduction
• the corporate tax rate is 13 percent on other income
• the dividend tax credit is 20 percent of the dividend gross up for non-eligible dividends
• the dividend tax credit is 30 percent of the dividend gross up for eligible dividends
Ms. Ho has asked your advice as to whether she should incorporate this business. Advise her 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.