Reference no: EM132462258

Question 1: Shirley wants to decide whether it makes sense for her to invest her money personally or via a corporation. She has the following income

Interest income $3,500

Required: Indicate to Shirley

Problem a) How much taxes she would pay personally

Problem b) How much taxes she would pay if the income flowed through the corporation

Problem c) Determine if there is a tax cost or tax savings if she invested personally versus in the corporation, and how much

Problem d) Determine if there is a prepayment or a deferral of taxes when the corporation is used, and how much

Personal Tax rate                     50%

Corporate tax rate - SBD           13%

Dividend Gross up - non eligible  15%

Corporate rate - no SBD            27%

Dividend gross up - eligible        38%

Question 2: Robin Ltd. is a corporation whose only business is providing accounting services for a fee to Faith Ltd., a large, privately owned, arm's length corporation. Shari and David are each 50% shareholders and the only employees of Robin Ltd. Prior to the incorporation of Robin Ltd., both Shari and David were employed by Faith Ltd. in the accounting department. What type of income is Robin Ltd. earning?

Problem (a) Active business income

Problem (b) Property income

Problem (c) Specified investment business income

Problem (d) Personal services business income

Explain your reasoning

Question 3: The voting common shares of Elana Inc. are owned 35% by Jonathan Inc., 25% by Alexander Inc., and 40% by an individual, Elana. Jonathan Inc. and Alexander Inc. are 100% owned by Jon and Alex, respectively. Their spouses are sisters. Elana Inc. derives all of its income from a ladies' wear retailing business carried on in Toronto on a property owned by Jonathan Inc.

Required:

Problem 1: Show how Jonathan Inc. and Elana Inc. are associated. Describe the reasons for this association, in detail, by reference to specific conditions in the Act.