Compute the tax for the three remuneration alternatives

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Question - Yuri Gagarin is the sole shareholder and employee of Rocket Man Inc. which operates in a province with a corporate rate of 5% (i.e. a total corporate rate of 14%) on its income. The corporation has income of $20,000 before salaries and corporate income taxes eligible for the small business deduction. Yuri has no other source of income or deductions and has federal tax credits of $2,100 and $1,400 provincial tax credits. He requires all income generated by the business.

Required - Compute the tax for the following three remuneration alternatives:

1. All salary

2. All dividends

3. $10,000 in salary and the remainder in dividends

Reference no: EM133079804

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