One of your clients has asked your advice on whether she should transfer a group of investments to a new corporation that can be established to hold them. The corporation will be a Canadian controlled private corporation and she anticipates that the transferred investments will have the following amounts of income for the year ending December 31, 2020: Your client has business income of over $250,000. She needs all of the income that is produced by these investments to purchase art for her cherished collection. On additional amounts, your client is subject to a provincial tax rate of 18 percent.
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 12 percent on other income
• the dividend tax credit is 25 percent of the dividend gross up for non-eligible dividends
Provide the requested advice, including an explanation of your conclusions.

Question

One of your clients has asked your advice on whether she should transfer a group of investments to a new corporation that can be established to hold them. The corporation will be a Canadian controlled private corporation and she anticipates that the transferred investments will have the following amounts of income for the year ending December 31, 2020:  Your client has business income of over $250,000. She needs all of the income that is produced by these investments to purchase art for her cherished collection. On additional amounts, your client is subject to a provincial tax rate of 18 percent.
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 12 percent on other income
• the dividend tax credit is 25 percent of the dividend gross up for non-eligible dividends
Provide the requested advice, including an explanation of your conclusions.

Quizplus · Accepted Answer

The Answer of One of your clients has asked your advice on whether she should transfer a group of investments to a new corporation that can be established to hold them. The corporation will be a Canadian controlled private corporation and she anticipates that the transferred investments will have the following amounts of income for the year ending December 31, 2020:  Your client has business income of over $250,000. She needs all of the income that is produced by these investments to purchase art for her cherished collection. On additional amounts, your client is subject to a provincial tax rate of 18 percent.
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 12 percent on other income
• the dividend tax credit is 25 percent of the dividend gross up for non-eligible dividends
Provide the requested advice, including an explanation of your conclusions.

One of Your Clients Has Asked Your Advice on Whether