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Investment Income in a Corporation

posted Oct 21, 2012, 3:57 PM by Margaret Lin CPA, CGA, CFP   [ updated Sep 12, 2016, 10:04 PM ]

In most case, hold your investment and earn investment income in a corporation could cost you more taxes than holding it personally. In some case there is no tax deferral benefit but tax prepayment.  In British Columbia, say you are in the highest tax bracket, additional of $1,000 investment income earned by the corporation instead of earning it personally can cost you $19 more of taxes.  If you choose retaining the surplus in the corporation, it results $10 of taxes prepayment. Caution should be particularly taken when investment is held in a corporation carrying on an active business.  Also there is the potential for double tax, especially on death.

 

But other potential benefits do exist:

 

  • Protection of assets from creditor
  • Reduction or avoidance of probate fees
  • Protection of assets from U.S. estate tax if the property situated within U.S.
  • Control over the timing of dividend payments to maximize Old Age Security (OAS) benefits
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