(1) the individual earning the income directly without the use of a corporation and (2) earning the income through a corporation and distributing all of the after-tax corporate income as a non-eligible dividend to the sole individual shareholder. If integration is not working properly, briefly explain why
Byrd & Chen’s Canadian tax principles-2
Chapter # 13
AP 13-1 (Integration Example)
Assume the following with respect to an individual shareholder of a wholly owned CCPC:
• The corporation’s only income is active business income of $340,000, all of which qualifies for the small business deduction.
• The corporation has no GRIP and therefore all of the taxable dividends it pays will be non-eligible dividends.
• The individual’s marginal federal tax rate is 33% and his marginal provincial tax rate is 15%.
• The provincial dividend tax credit on non-eligible dividends is equal to 34% of the gross up.
• The combined federal and provincial corporate tax rate on business income is 12.0%.
Required: Indicate, using these assumptions, whether integration is working perfectly and
whether it is beneficial to use a corporation to earn the company’s active business income in
this instance. Show all supporting calculations, including both the income tax comparison and
after-tax return comparison of (1) the individual earning the income directly without the use of a
corporation and (2) earning the income through a corporation and distributing all of the after-tax
corporate income as a non-eligible dividend to the sole individual shareholder. If integration is
not working properly, briefly explain why.
![](/static/compass_v2/shared-icons/check-mark.png)
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)