| Chapter 13, AP 13 Samantha Greene |
| Purchase of a Business, Compensation |
| *(Federal 2020 Personal Tax Rates on TB Page 537) |
| *(Provincial 2020 Personal Tax Rates TB Page 541) |
| | | | | input cells |
| *Fed & Prov combined Corporate Tax Rate is 13% |
| PART I | | Proprietorship |
| 2002 Green Dental | | Purchase Personally | | | Incorporate |
| Business income | A | 400,000.00 | | | 400000 |
| CPP DEDUCTION ( max 2020 | | -2898 |
| PRSP Deduction ( max 2020 | B | -27230 |
| Taxable Income | | 369872 | | | 400000 |
| tax | | 156947 | | | 52000 |
| CPP (Both portion | | 5796 |
| basic personal amount (15%federal+10% prov. (12298*0.25 | | -3057 | reduced BPA Pg 544 |
| cPP (15% fed+10% prov. | | -725 |
| Net Tax Payable | C | 158961 | | | 52000 |
| After-Tax Cash (A-B-C) | | 213809 | | | 348000 |
| Repay Debt | | -100000 | | | -100000 |
| Net Cash Available | | 113809 | | | 248000 |
| PART II |
| Incorporation Options | | All Salary | | | All Dividends |
| CORPORATION |
| business incom | | 400,000.00 | | | 400000 |
| Salary Note 1 | | -282159 |
| CPP ( Company portion ) | | -2898 |
| Taxable Income | | 114943 | | | 400000 |
| tax at 13% | | 14943 | | | 52000 |
| After-Tax Cash | | 100000 | | | 348000 |
| repayment of debt | | -100000 | | | -100000 |
| cash available | | 0 | | | 248000 |
| SAMANTHA |
| salary/dividened | | 282159 | | C | 248000 |
| Gross up at 15% | | | | | 37200 |
| RSP Deduction max | | -27230 |
| Taxable Income | A | 254929 | | | 285200 |
| tax | | 99475 | | | 114611 | | (49644)+((285200-214369)*(0.33))+(29551)+((285200-214369)*(0.17)) |
| cpp | | 2898 |
| basic personal amount credit | | -3075 | | | -3075 |
| cpp | | -725 |
| employment credit | | -311 |
| dividend tax credit | | | | | -37200 |
| Net Tax Payable | B | 98263 | | D | 74336 |
| After-Tax Cash (A-B) | | 156666 | | (C-D) | 173664 |
| Note 1 - max salary required |
| 100000 aftrer tax cashreqyired to pay the loan will give you pre tax income | | 114943 |
| take 400000+cppmax to be remitted | | 397102 |
| Salary required | | 282159 |
| CONCLUSION: |
| she should incorprate there is a significant after tax advantage |
| she can use the additional cash to repay debt |
| if she wanted to invest in PRSP WE WOULD pay her salary instead dividened |
| if she wanted to collect CPP at retirment we would have to pay salay at least up to Yearly Maximum Pension earning |
necolas00073
CH13AP13.xlsx
