Nashwa has a business that she estimates will produce annual income of $100,000. She is planning to incorporate this business in 2020, and if she does, all of the income will be eligible for the small business deduction and all dividends paid will be non-eligible. In her province, such corporate income is taxed at a combined federal/provincial rate of 15 percent. Nashwa is taxed at a combined federal/provincial rate of 43 percent. The provincial dividend tax credit rate for non-eligible dividends is equal to 29 percent of the gross up.
Would Nashwa save taxes if she was to channel this source of income through a corporation? Explain your result.

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The Answer of Nashwa has a business that she estimates will produce annual income of $100,000. She is planning to incorporate this business in 2020, and if she does, all of the income will be eligible for the small business deduction and all dividends paid will be non-eligible. In her province, such corporate income is taxed at a combined federal/provincial rate of 15 percent. Nashwa is taxed at a combined federal/provincial rate of 43 percent. The provincial dividend tax credit rate for non-eligible dividends is equal to 29 percent of the gross up.
Would Nashwa save taxes if she was to channel this source of income through a corporation? Explain your result.

Nashwa Has a Business That She Estimates Will Produce Annual