Mr. Nemcek has $200,000 in cash that he does not currently require for personal expenses. In his province of residence, the combined federal/provincial rate on investment income earned by a CCPC is 51-2/3 percent, including the ITA 123.3 refundable tax on investment income (ART). At the personal level, Mr. Nemcek has employment income of over $175,000. This means that his marginal tax rate at the federal level is 29 percent. His marginal provincial rate is 14 percent. The provincial dividend tax credit on eligible dividends is equal to 35 percent of the gross up. It is Mr. Nemcek's intent to invest his $200,000 on January 1, 2021, in preferred shares of a widely traded public company. The company pays eligible dividends of 4 percent per annum. Mr. Nemcek's only investment income for the year will be the $8,000 of eligible dividends that he receives on these shares. Required: Prepare calculations that will compare the after tax retention of income that will accrue to Mr. Nemcek for 2021 if: A. The investment in the preferred shares is owned by him as an individual. B. The investment is owned by a corporation in which he is the sole shareholder and which pays out all available income in eligible dividends.

Mr. Nemcek has $200,000 in cash that he does not currently require for personal expenses. In his province of residence, the combined federal/provincial rate on investment income earned by a CCPC is 51-2/3 percent, including the ITA 123.3 refundable tax on investment income (ART). At the personal level, Mr. Nemcek has employment income of over $175,000. This means that his marginal tax rate at the federal level is 29 percent. His marginal provincial rate is 14 percent. The provincial dividend tax credit on eligible dividends is equal to 35 percent of the gross up. It is Mr. Nemcek's intent to invest his $200,000 on January 1, 2021, in preferred shares of a widely traded public company. The company pays eligible dividends of 4 percent per annum. Mr. Nemcek's only investment income for the year will be the $8,000 of eligible dividends that he receives on these shares. Required: Prepare calculations that will compare the after tax retention of income that will accrue to Mr. Nemcek for 2021 if: A. The investment in the preferred shares is owned by him as an individual. B. The investment is owned by a corporation in which he is the sole shareholder and which pays out all available income in eligible dividends.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter2: Income Tax Concepts

Section: Chapter Questions

Problem 20P: Sheila, a single taxpayer, is a retired computer executive with a taxable income of 100,000 in the...

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