Canadian Income Tax

Chapter 1 Comprehensive Question – The text book lists four fundamental tax variables which a manager needs to consider when making business decisions. List the relevant variables within these four categories. These variables are listed below.
A. primary types of income entities subject to taxation on income alternative forms of business structures used by taxable entities tax jurisdictions
Chapter 2 Comprehensive Question – 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:
On the first $47,000 24% On the next $47,000 32% On the next $51,000 40% On the next $61,000 45% On income over $206,000 50%
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.
Determine the increase in Steven’s cash flow if he incorporates his company?

Sample Solution