Victor Vice is a very conservative investor who only invests in fixed income securities. He anticipates that he will have interest income of $210,000 for the year ending December 31, 2020. As he has employment income of more than $400,000 per year, any additional income is taxed at a combined federal/provincial rate of 51 percent.
In his province of residence:
• the corporate tax rate is 3 percent on income eligible for the small business deduction
• the corporate tax rate is 13 percent on other income
• the dividend tax credit is 30 percent of the dividend gross up for non-eligible dividends
Mr. Vice has asked your advice as to whether he should transfer his interest bearing investments to a corporation in which he would own all of the shares. Advise him 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 Victor Vice is a very conservative investor who only invests in fixed income securities. He anticipates that he will have interest income of $210,000 for the year ending December 31, 2020. As he has employment income of more than $400,000 per year, any additional income is taxed at a combined federal/provincial rate of 51 percent.
In his province of residence:
• the corporate tax rate is 3 percent on income eligible for the small business deduction
• the corporate tax rate is 13 percent on other income
• the dividend tax credit is 30 percent of the dividend gross up for non-eligible dividends
Mr. Vice has asked your advice as to whether he should transfer his interest bearing investments to a corporation in which he would own all of the shares. Advise him 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.

Victor Vice Is a Very Conservative Investor Who Only Invests