31 Questions
Which type of account has special tax status allowing for tax-deductible contributions and deferred taxes on investment earnings?
Registered account
What is the main difference in taxation between registered and non-registered accounts?
Deferral of taxes on investment earnings
Which organization registers savings plans under the federal Income Tax Act in Canada?
Canada Revenue Agency (CRA)
What type of income has its tax treatment described in the lesson?
Canadian dividend income
What does it mean for contributions to be tax deductible in registered accounts?
Contributions reduce taxable income in the year they are made
What is Ben's combined marginal tax rate if his taxable income is $165,000?
42%
If Ben's taxable income is $89,000, what would be his average tax rate?
23.11%
Between $150,473 and $157,464, what is the difference in the combined marginal tax rates?
4%
For taxable incomes over $214,368, what is the federal marginal tax rate?
33%
What is Ben's provincial tax payable if his taxable income is $80,000?
$4,200
At what taxable income level would Ben's average tax rate be exactly 28%?
$97,500
Between $131,220 and $150,473, how much higher is the federal marginal tax rate compared to the Alberta marginal tax rate?
4%
If Ben's taxable income is $250,000, what would be his total tax payable (federal and provincial)?
$120,682.10
Why was the gross-up and tax credit mechanism designed for Canadian dividends?
To minimize the double taxation of dividends
What type of income do dividends come from?
After-tax net income
What is the purpose of the dividend tax credit?
To minimize the tax burden on eligible dividend recipients
Why might an eligible individual in a lower tax bracket end up with a negative marginal tax rate?
As a result of the non-refundable nature of the dividend tax credit
Why is it considered unfair for shareholders to pay taxes at their regular marginal tax rate on Canadian dividends?
Due to the potential double taxation of corporate profits
Why do dividends paid by foreign corporations not receive special tax treatment when paid to Canadian shareholders?
Due to the lack of corporate income tax payments made by foreign corporations to the federal government
What would happen if shareholders were taxed twice on Canadian dividends?
Double taxation of corporate profits would occur
Why does Pavel's federal marginal tax rate (MTR) matter in determining his federal tax payable for each dividend?
Because it determines how much he can deduct as a tax credit
What is one way in which mutual funds generate taxable income for investors?
By distributing interest income, dividends, and net capital gains
When does a distribution occur in a mutual fund?
When interest income, dividends, and net capital gains are flowed-through to investors
What happens if a mutual fund investor sells units of the fund at a market price greater than their cost?
They realize a capital gain
Why are capital losses important in the context of mutual funds?
Capital losses help offset realized capital gains within the mutual fund
What does it mean when a mutual fund distributes a capital gain to unitholders?
It results in a net capital gain for the unitholders
How is income earned at the trust level and not distributed to unitholders treated for taxation?
It is taxed at the highest marginal rate
In December, an investor sells mutual fund units for $3,000 when they were initially purchased for $2,500. What is the correct term for this scenario?
$500 capital gain
'Flow-through' of taxable income refers to what process in mutual funds?
'Flowing-through' of interest income, dividends, and net capital gains to investors
What type of income can be flowed through to mutual fund corporation unitholders?
Canadian dividends and capital gains
How is income generated from a mutual fund corporation reported?
On T5 Slip – Statement of Investment Income
Learn about Ben, an Alberta resident, and his combined marginal tax rates based on different income brackets. Understand how federal and Alberta marginal tax rates are applied to calculate the overall combined marginal tax rate.
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