Chapter Seven Homework

Part 1:

Your friend, Charles T. Winchester has a large T4 for most of his income in the 2020, and he is in the highest bracket for income tax, in his home province of BC. The following will be taxed at the highest marginal tax bracket 53%. Eligible dividends are subject to a 38% Gross up, a federal credit of 6/11 of the gross up and in his province a 30% for the provincial dividend tax credit.

In 2020 Charles has received $40,000 in eligible dividends.

Determine his net tax liability for these dividends

Determine his after tax cash retention from these dividends

Part 2:

Your friend, Ben Pierce in the moderate bracket for income tax, in his home province of BC. The following will be taxed at the marginal tax bracket 43%. Non-Eligible dividends are subject to a 15% Gross up, a federal credit of 9/13 of the gross up and in his province a 20% for the provincial dividend tax credit.

Ben received non-eligible dividends in the amount of $21,000 in 2020

Determine his net tax liability for these dividends

Determine his after tax cash retention from these dividends

Part 3:

Margaret Houlihan has a rental house in Boston Bar, BC:

1. She has a mortgage on it that directly financed the purchase. The payments made were $14,980 for the year of which $7,980 were for interest.
2. Maintenance was $3,500 for the year
3. Rent of $25,000 was collected, the management company charged a fee of $1,600 to collect it and arrange maintenance.
4. CCA on the building could be $3,89
5. Property taxes of $1.400 were paid.
6. She paid her 7 year old daughter $400 per month to check the mail for the rent cheques.

Determine her net rental income

Part 4:

Jesse Wagner has purchased an interest bearing investment in the amount of $45,000 on December 1, 2020. It bears interest at 10% annually, but the interest is to be paid up to date on December 31, 2023, and the final payment on November 30, 2025.

Determine the taxable amount of interest in each year.