The adjusted aggregate investment income (AAII) grind might not be the end of the world, especially in Ontario (which did not adopt the grind), because of the lower rate paid by an individual when funds are withdrawn from the corporation as a dividend. The author’s calculation suggests that the net cash retained personally by a shareholder might actually be almost $20,000 more where the grind applies in respect of $500,000 of active income.
This calculation appears to ignore the deferral advantage for funds retained in the corporation where it was entitled to the full amount of the small business deduction.
Jeanne Cheng, “The Small Business Deduction and the AAII Grind: Is It a Real Problem?” 21:3 Tax for the Owner-Manager (July 2021)
