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Having worked as an individual management consultant, Nicola Nonchev has enjoyed a great deal$$of success. Her effectiveness has generated a fairly long list of potential clients. Recognizing the$$opportunities involved in this situation, Nicola has decided to join a general partnership, Consulting$$Unlimited $($CU$).$

She will be admitted to the partnership January $1,2023,$ with a $25\%$ partnership interest. She is$$giving consideration to either becoming a partner herself or incorporating a wholly owned CCPC$$that will become the partner. If the CCPC becomes the partner its business limit is specified by ITA $125$ and cannot exceed $25\%$ with respect to partnership allocations of active business$$income$.$ Therefore, the business limit will be $$125,000[(25\%)($$$500,000)].$ Distributions of partnership income to her will be made based on the three following alternatives:

Alternative $1$ Her CCPC $($the corporate partner$)$ will pay corporate income tax on$$allocations of partnership income, with after$-$tax funds being paid to Nicola as taxable$$dividends$.$

Alternative $2$ Nicola will use a bonus down strategy to reduce the corporate income to the $$125,000$ amount eligible for the SBD$,$ with aft$-$tax funds being paid to Nicola as taxable dividends.

Alternative $3$ Nicola will personally become a member of the partnership and will be subject to income tax on any allocations of income.$$

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