Question Description

You had your second meeting with your personal taxation client, Irene. She has provided you with lots of tax information and supporting backup on her investments for 2021. Irene is in the 29 percent federal tax bracket and 16 percent provincial tax bracket. Assume that the federal and provincial dividend tax credits are equal to the total dividend gross up. See Exhibit III for her tax details:

She would like you to calculate the total amount to include in her taxable income, her total tax (given her tax bracket), as well as the after-tax cash she made on the investment. In addition, Irene would like to know if there will be any future tax impact.

Exhibit III

Public Company Shares: a total of 10,000 shares of 123 Inc. were purchased in 2021 at a cost of $15 per share. The shares paid an eligible dividend of $7.50 per share in 2021. The shares were sold on December 31, 2021, for $27 per share.

CCPC Shares a total of a total of 88 shares of 456 Corp. were purchased in 2021 at a cost of $45 per share. 456 is a Canadian controlled private company. The shares paid a non-eligible dividend of $2 per share in 2021. The shares have NOT been sold as of December 31, 2021.

Foreign Term Deposit a Euro () term deposit was acquired on January 1, 2021. The maturity value is 65,000 (a Canadian dollar cost of $91,000). The initial amount of the term deposit along with interest of 5,000 is paid. Foreign tax authorities withhold 15 percent of the interest. Assume that throughout 2021, 1.00 = $1.47.