Maximilian Maximus has employment income in excess of $300,000. This means that any additional income will be taxed at a combined federal/provincial rate of 51 percent.
For the year ending December 31, 2020, in addition to his employment income, Max has the following amounts of investment income: Because of his extensive use of recreational drugs, Max requires all of the income that is produced by these investments (and then some).
In his 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 4/13 percent of the dividend gross up for non-eligible dividends
Max has asked your advice as to whether there would be any tax benefits associated with transferring his investments to a corporation. Provide the requested advice, including an explanation of your conclusions.

Question

Maximilian Maximus has employment income in excess of $300,000. This means that any additional income will be taxed at a combined federal/provincial rate of 51 percent.
For the year ending December 31, 2020, in addition to his employment income, Max has the following amounts of investment income:  Because of his extensive use of recreational drugs, Max requires all of the income that is produced by these investments (and then some).
In his 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 4/13 percent of the dividend gross up for non-eligible dividends
Max has asked your advice as to whether there would be any tax benefits associated with transferring his investments to a corporation. Provide the requested advice, including an explanation of your conclusions.

Quizplus · Accepted Answer

The Answer of Maximilian Maximus has employment income in excess of $300,000. This means that any additional income will be taxed at a combined federal/provincial rate of 51 percent.
For the year ending December 31, 2020, in addition to his employment income, Max has the following amounts of investment income:  Because of his extensive use of recreational drugs, Max requires all of the income that is produced by these investments (and then some).
In his 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 4/13 percent of the dividend gross up for non-eligible dividends
Max has asked your advice as to whether there would be any tax benefits associated with transferring his investments to a corporation. Provide the requested advice, including an explanation of your conclusions.

Maximilian Maximus Has Employment Income in Excess of $300,000