Solution%20to%20Assignment%20Problem%20Ch15%28III%29

Solution%20to%20Assignment%20Problem%20Ch15%28III%29 -...

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Solution to Assignment Problem Fifteen - 10 Part A - All Salary As salary payments can be deducted by the corporation, the entire $24,200 can be paid as salary. Given this deduction, no taxes would be paid by the Company for the year. With a salary payment of $24,200, Ms. Stickle’s after tax cash balance would be as follows: Salary Payment $24,200 Tax Before Credits [(25%)($24,200)] ($6,050) Personal Tax Credits (Given) 3,423 ( 2,627) After Tax Cash Retained $21,573 Part B - All Dividends The tax rate for Stickle Ltd. would be 16% (38% - 10% - 17% + 5%). As dividend payments are not deductible to the Company, taxes of $3,872 [(16%)($24,200)] will have to be paid, leaving a maximum of $20,328 to be used for the payment of dividends. When this is paid, the after tax retention by Ms. Stickle will be as follows: Non-Eligible Dividends Received $20,328 Gross Up [(25%)($20,328)] 5,082 Taxable Dividends $25,410 Tax Before Credits [(25%)($25,410)] $ 6,353 Personal Tax Credits (Given) ( 3,423) Dividend Tax Credit [(2/3 + 30%)($5,082)] ( 4,913) Tax Payable Nil Dividends Received $20,328 Tax Payable
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Solution%20to%20Assignment%20Problem%20Ch15%28III%29 -...

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