Janice Huber has a business that she estimates will produce income of $75,000 per year. Because she controls another corporation that fully utilizes $500,000 of its small business deduction, if she incorporates this business, none of this income will be eligible for the small business deduction and any dividends paid would be designated eligible. In the province where she lives, such corporate income is taxed at a combined federal/provincial rate of 28 percent. Ms. Huber has other income sources that place her in a combined federal/provincial tax bracket of 46 percent. In her province, the provincial dividend tax credit for eligible dividends is equal to 32 percent of the gross up.
Would Ms. Huber save taxes if she was to channel this source of income through a corporation? Explain your result.

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The Answer of Janice Huber has a business that she estimates will produce income of $75,000 per year. Because she controls another corporation that fully utilizes $500,000 of its small business deduction, if she incorporates this business, none of this income will be eligible for the small business deduction and any dividends paid would be designated eligible. In the province where she lives, such corporate income is taxed at a combined federal/provincial rate of 28 percent. Ms. Huber has other income sources that place her in a combined federal/provincial tax bracket of 46 percent. In her province, the provincial dividend tax credit for eligible dividends is equal to 32 percent of the gross up.
Would Ms. Huber save taxes if she was to channel this source of income through a corporation? Explain your result.

Janice Huber Has a Business That She Estimates Will Produce