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Wayne Sanberg is the only shareholder of Colley Inc., a Canadian controlled private company. For the taxation year ending December 31, 2022, the Company has Taxable Income, before any consideration of salary to Wayne or the payment of dividends, of $135,000. All of this income qualifies for the small business deduction.

The company has Taxable Income of $135,000 and Wayne would like to take $45,000 out of the company to use personally in either salaries, or dividends.

Waynes only source of income is either dividends or salary from Colley Inc. For 2022, he has available tax credits of $4,200 (combined federal and provincial).

Relevant information with respect to his current province of residence is as follows:

The Federal tax rate for individuals on the first $48,535 of taxable income is 15 percent. The provincial tax rate for individuals in the province Wayne resides is 5.05% on the first $46,226.

The provincial dividend tax credit is equal to 32 percent of the gross up on non-eligible dividends.

All of the companys activities are confined to a province in which the applicable corporate rate of taxation is 3 percent on income eligible for the small business deduction. The province does not levy a payroll tax.

Required: Advise Wayne as to the method to pay himself funds from Colley Inc. that will produce the maximum after-tax cash retention for Wayne. Explain your conclusion and calculate the amount of this after-tax cash retention.

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