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

question 4

Essay

Steven James earned $150,000 this year in profits from his proprietorship.The rate of tax for Canadian-controlled private corporations in his province is 13% 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 withdraws $3,000 per month for his personal living expenses.All remaining profits are used to pay taxes and to expand the business.Steven expects the same business after-tax profits next year.
Steven is considering incorporating his business next year.If he incorporates,he will pay himself a gross salary of $48,000.
Required:
A.Determine the increase in Steven's cash flow if he incorporates his company? Show all calculations.
B.Name the type of tax planning that Steve would be engaging in if he incorporated his company.

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Definitions:

Demographic Transition

A model describing changes in birth and death rates in a country as it develops, leading to stabilization of the population.

Birth Rate

The frequency at which births occur in a population per unit time, often measured as the number of births per 1,000 people per year.

Death Rate

The number of deaths per unit of population within a specific time frame, often expressed per 1,000 or 100,000 individuals per year.

Demographic Transition

The transition from high birth and death rates to low birth and death rates, accompanying economic development and improvements in living conditions.