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Anthony is the sole shareholder of Glass Co.He would like to lend $500,000 to his company by way of a shareholder loan.He is not sure whether to issue an interest free loan or a loan with an interest rate of 10%.Anthony does not pay himself a salary,but rather issues all after-tax profits to himself in the form of a dividend.
Required:
Calculate the total combined tax liability for Anthony and Glass Co.under both alternatives (an interest free loan and a loan with 10% interest).(Assume that CRA's prescribed rate of interest is 2%,Anthony's personal tax rate is 50%,his marginal tax rate on dividends is 43%,and Glass Co.has income of $200,000,subject to a 13% tax rate.)
B)Has double taxation occurred in either scenario?
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