Danny lives in Ontario and earns a salary of $92,500 annually. Deductions from his pay are as follows:

CPP $2,356

EI $469

Employer pension contribution $4,625

Employee pension contribution $4,625

Union Dues $500

Extended health care $600

Tax deducted at source $30,000

He contributed $10,000 to his RRSP in 2017. He has sufficient contribution room available.

He also holds a non-registered investment portfolio with the following holdings:

Canadian Resource Co. 150 shares valued at $25 per share. Dividends paid in the year amounted to $250.

American Tech Co. 200 shares valued at $15 per share. Dividends paid in the year amounted to $400.

UK Bond par value $1,000 earning an interest rate of 2.50%.

Real Estate Investment Trust with a current value of $17,500, which only paid a return of capital in the amount of $1,000 in the year.

Balanced Mutual Fund with a current value of $32,000. The fund had a capital gain of $300 and interest income of $150. All these earnings were automatically re-invested.

Non-redeemable GIC with a principal value of $15,000 earning a rate of 3.00% compounded annually. The GIC was purchased at the beginning of the year and has a 3 year term.

He also has broker cash held in the account of $5,000, which earns a rate of 0.50%.

During the year he sold some stocks for a capital gain of $25,000. He also had a capital loss of $5,200 on other dispositions in the account.

Dividend gross up = 38%

Federal dividend tax credit = 20.73%

Provincial dividend tax credit = 13.80%

Ontario surtax: 20% on Ontario tax greater than $4,638 and 36% on Ontario tax greater than $5,936

Calculate tax payable for 2018 based on the information provided assuming that these were all the tax events that occurred. Ignore tax credits such as the basic personal amount but include the dividend tax credit and relevant deductions from taxable income. Explain any exclusions from the calculation.

Do not use any tax software or complete a tax return online, no marks will be provided for such a solution. It must be calculated manually. (19 Marks)

Calculate Danny’s average tax rate and his marginal tax rate. (2 marks)

Calculate Danny’s marginal tax rate on the following:

1. Marginal tax rate on interest income.
2. Marginal tax rate on dividends. 
3. Marginal tax rate on capital gains.