Ms. Shauna MacDonald has investments that she anticipates will earn interest income of $143,000 for the year ending December 31, 2020. She has employment income in excess of $300,000 with additional amounts subject to a provincial tax rate of 18 percent.
In her province of residence:
• the corporate tax rate is 3 percent on income eligible for the small business deduction
• the corporate tax rate is 14 percent on other income
• the dividend tax credit is 25 percent of the dividend gross up for non-eligible dividends
Ms. MacDonald has asked your advice as to whether she should transfer these investments to a corporation in which she would own all of the shares. Advise her with respect to any tax deferral that could be available on income left in the corporation and on any tax savings that could be available if all of the income is paid out in dividends.

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The Answer of Ms. Shauna MacDonald has investments that she anticipates will earn interest income of $143,000 for the year ending December 31, 2020. She has employment income in excess of $300,000 with additional amounts subject to a provincial tax rate of 18 percent.
In her province of residence:
• the corporate tax rate is 3 percent on income eligible for the small business deduction
• the corporate tax rate is 14 percent on other income
• the dividend tax credit is 25 percent of the dividend gross up for non-eligible dividends
Ms. MacDonald has asked your advice as to whether she should transfer these investments to a corporation in which she would own all of the shares. Advise her with respect to any tax deferral that could be available on income left in the corporation and on any tax savings that could be available if all of the income is paid out in dividends.

Ms Shauna MacDonald Has Investments That She Anticipates Will Earn