Problem
Matthew is the sole owner of MIC Inc. MIC Inc is qualified as a Canadian Controlled Private Corporation (CCPC). MIC Inc's main operation is to sell household disinfectant products. Due to the pandemic, MIC Inc had a profitable year in 2020 and Matthew did not apply for any government assistance program last year. Matthew knew that there are 3 types of dividends a CCPC can declare, but he isn't sure how to designate between each of them to minimize his tax liability. Matthew is planning to declare dividends of $100,000.
a) Capital Dividends Account Balance: $50,000
b) Eligible Return on Dividends Tax On Hands (ERDTOH): $80,000
c) Non-Eligible Return Dividends Tax On Hands: $80,00
Task
As a CPA, prepare an analysis to explain each type of dividends and how does Matthew allocate the amount of dividends to minimize tax liability.