On January 1, 2021, Ms. Finster is notified that she has won $250,000 in the provincial lottery. This amount is immediately available to Ms. Finster and is not subject to any form of taxation.

Ms. Finster has no immediate need for these funds. However, she is retiring on January 1, 2022 and would like to have the funds available at that time for use in relocating to a warmer climate. Given this, she would like to invest the funds for the period ending December 31, 2021.

She is considering investing the money in shares of a Canadian public company. The shares are currently trading at $125 per share and pay an annual eligible dividend of $6.00 per share.

Ms. Finster has sufficient employment income that puts her in the 29 percent federal tax bracket and the 15 percent provincial tax bracket on additional income earned. Assume the provincial dividend tax credit for eligible dividends is equal to 30 percent of the gross-up.

a. Determine the total tax that will be payable on the Eligible Dividends received during the year ended December 31, 2021, as well as Ms. Finster's after-tax cash retention (6 marks).

Answer rating: 100% (QA)

Solution a Total tax payable on eligible dividends Federal t... View the full answer