Bryan Hill owns all of the issued shares of Hill & Associates Inc., a consulting firm he started five years ago. Bryan’s only source of income is from the corporation and he has federal personal, non-refundable tax credits of $2,500 and provincial tax credits of $1,700. The corporation has a tax rate of 14.5% on its income eligible for the small business deduction.

REQUIRED

Determine the best combination of salary and/or dividend that Bryan should take in order to minimize the total corporate and personal tax for the year, assuming that the corporation earned net income of $100,000 before owner compensation and income tax. Bryan needs a pre-tax amount of $36,000 in cash to meet his personal expenses. Use the 17% gross-up.