This problem compares the aftertax 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.

Table 2-13

a. Calculate the aftertax return for Truck in Investment A and Investment B.
b. Calculate the aftertax return for Carr in Investment A and Investment B.
c. Indicate the difference in aftertax income between the two investors in Investment A.
d. Indicate the difference in aftertax 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?

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