Sharon Hartly Is the Owner-Manager of a CCPC from Which

question 115

Multiple Choice

Sharon Hartly is the owner-manager of a CCPC from which she receives an annual salary of $70,000 per year.For 2011, after deducting her salary, the CCPC will have additional
Income of $150,000.Sharon would like to take additional funds of $40,000 out of the corporation.Which of the following statements is correct?

• A)The best solution is to take the funds out as salary as this will increase her pensionable earnings for CPP purposes.
• B)The best solution is to take the funds out as a dividend as this will have the lowest tax cost.
• C)The best solution is to take the funds out as salary because this will reduce her CNIL
• Balance for purposes of the lifetime capital gains deduction.
• D)The best solution is to take the funds out as salary so that she can maximize her contri- bution to her RRSP.

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Definitions:

Call Option

A financial contract giving the buyer the right, but not the obligation, to purchase a stock or other asset at a specified price within a certain time frame.

Present Value

The current value of a future amount of money or stream of cash flows given a specified rate of return.

Deltas

In options trading, deltas measure the rate of change of the option's price relative to a one-unit change in the price of the underlying asset, indicating how the price of the option is expected to move.

Portfolio Hedge Ratios

Ratios used to determine the appropriate amount of hedging needed to minimize risk in an investment portfolio, often through derivatives like options or futures.