Steven James Earned $150,000 This Year in Profits from His

question 10

Essay

Steven James earned $150,000 this year in profits from his proprietorship,which placed him in a 45% tax bracket.The rate of tax for Canadian-controlled private corporations in his province is 15% on the first $500,000 of income.Personal tax rates (federal plus provincial)in James' province are:
(All rates are assumed for this question.)
Steven requires $3,000 of after-tax withdrawals per month for his personal living expenses.All remaining profits are used to pay taxes and to expand the business.Steven expects the same profits before living expenses next year.
Steven is considering incorporating his business next year.If he incorporates,he will pay himself a gross salary of $48,000.
Required:
Determine the increase in Steven's cash flow if he incorporates his company? Show all calculations.
A.Why will Steve set his new salary at $48,000?
B.Name the type of tax planning that Steve would be engaging in if he incorporated his company.

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Definitions:

Cohabitating Couples

Couples who live together in a shared dwelling without being legally married.

Hypoactive Sexual Desire Disorder

A sexual dysfunction characterized by a persistent or recurrent lack of desire for sexual activity that causes personal distress.

Sexual Desire

The psychological and emotional interest in sexual activity and the anticipation of such activity.

Sexual Activity

Engaging in various forms of sexual intercourse or other sexual behaviors typically involving erotic practices.