Reference no: EM132946154

Your calculations should use the following assumptions:

Active business income..........................................................$600,000
Taxable income.......................................................................$300,000
Business limit..........................................................................$200,000
Personal marginal tax rate on employment income................. 50%
Personal marginal tax rate on eligible dividends..................... 31%
Personal marginal tax rate on non-eligible dividends.............. 42%
Canada Federal Taxation - 12,875

Compare the after-tax personal cash from the following:

Question 1: Calculate the amount of bonus needed to reduce taxable income to the point where all of the taxable income is eligible for the small business deduction.

Question 2: Assuming that the bonus is declared and paid, calculate the personal tax on the bonus received by the individual and their after-tax cash.

Question 3: Assuming that the bonus is not declared, the calculate the amount of corporate tax the company will pay on the amount of the bonus identified in step 1. Then calculate the corporate after-tax cash on this bonus amount not paid. Pay this after-tax cash as a dividend and calculate the amount of personal tax on this dividend and their after-tax cash