RSM424H1 Lecture Notes - Lecture 2: Corporate Tax, Deferral, Income Property
Document Summary
Earnings are taxed at the corporate level. When dividends are paid out to individuals, there is another level of taxation. In theory, the total tax paid by a corporation and its shareholders should be the same as if the individual had earned the income directly. In this example, there is perfect integration since the after-tax earnings for both the unincorporated and incorporated options are the same. Low corporate tax rate (13% vs. 50% for personal) deferral of tax on business earnings so businesses can hire more employees, buy inventory (reinvest) to stimulate growth in the economy. Money taken out of the corporation, either as a salary or as dividends are subject to taxation. 870 dividend paid out (370) less: personal tax. Property income includes all dividends, deduct later to arrive at taxable income. 3(c) other deductions (rrsp, spousal support, moving expenses, etc. ) 3(d) losses from employment, business, property & abils.
