Marcus purchased 500 shares worth $10,000 of Design Co., a well-established company that provides outsourcing for technological research. On January 8, 2015, Design Co. declared a $2.50 dividend per share. The ex-dividend date is January 23, The dividends are to be paid on March 16, 2015. On January 20, 2015, he sold 100 shares of the company for $40 per share. Marcus’s personal tax rate is 35% (federal and provincial tax combined).

a. Given that capital gains are taxed at 50%, how much tax will Marcus pay for the sale of shares?

b. Assuming dividends are grossed up at 38% and the total dividend tax credit is equal to 20% of the grossed-up dividends, how much tax will Marcus pay on the cash dividends received from Design Co.?

c. What is his total tax obligation? Would your answer to part (b) be different if a stock dividend were paid instead of a cash dividend?