Payton Hewitt is the sole shareholder and employee of Conduit Corporation Ltd. which operates a processing business in a province with a 4% corporate...

Payton Hewitt is the sole shareholder and employee of Conduit Corporation Ltd. which operates a

processing business in a province with a 4% corporate rate (i.e., a total corporate rate of 14.5%) on its

income. The corporation has income of $20,000 before salaries and corporate taxes which is eligible for

the small business deduction. Mr. Hewitt has no other income and has federal tax credits of $2,000 and

provincial tax credits of $1,290. He requires all of the income generated by the business.

—REQUIRED

Consider the following three remuneration alternatives:

(A) all salary,

(B) all dividends, and

(C) $10,000 in salary and the remainder in dividends.

Compare the net cash to Mr. Hewitt for these alternatives ignoring employment income deductions

available to an employee.