This problem compares the after tax income on a $35,000 investment for the following two investors resident in Ontario and two possible investments. Table 2-13 will be of assistance. Stanley Truck earns $45,000 per year. This is his only investment. Blanche Carr is in the top marginal tax bracket. This is her only investment. Investment A provides $2 ,800 in dividends and no capital gains. Investment B provides no dividends but $2,800 of capital gains.

a. Calculate the after tax return for Truck in Investment A and Investment B.

b. Calculate the after tax return for Carr in Investment A and Investment B.

c. Indicate the difference in after tax income between the two investors in Investment A.

d. Indicate the difference in after tax income between the two investors in Investment B.

e. In the answers to parts c and d, why is there a smaller difference between the answers for one investment than for the other?

Table 2-13

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Dividends Capital Gains Тop Interest Income (Eligible) Top Province Тop Medium Medium Medium British Columbia 45.80% 29.70% 28.68% 9.63% 22.90% 14.85% Alberta 39.00 32.00 19.29 9.63 19.50 16.00 Saskatchewan 44.00 35.00 24.81 12.39 22.00 17.50 Manitoba 46.40 34.75 32.26 16.19 23.20 17.37 Ontario 49.53 31.15 33.82 9.63 22.30 15.58 Quebec 49.97 38.37 35.22 19.22 24.99 19.19 New Brunswick 46.84 36.82 27.35 13.52 23.42 18.41 Nova Scotia 50.00 36.95 36.06 18.05 25.00 18.48 Prince Edward Island 47.37 35.80 28.70 14.19 23.69 17.90 Newfoundland & 42.30 34.50 26.36 15.60 21.15 17.25 Labrador Yukon 42.40 31.68 19.29 9.63 21.20 15.30 Northwest Territories 43.05 30.60 22.81 9.63 21.53 15.84 Nunavut 40.50 29.00 27.56 11.69 20.25 14.50 Medium rate at about $50,000 of taxable income Top rate generally in effect at about $155,000, except Ontario at about $515,000