CTP13_Chapter_11

11000 6000 11000 copyright 2014 clarence byrd

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: - Net Income - ITA 3 Net – 3(a) Non-Capital Positive Sources – 3(b) Net Taxable Capital Gains (Positive Only) – 3(c) 3(a) + 3(b), Less Subdivision e Deductions – 3(d) Non-Capital Losses And ABILs Copyright © 2014, Clarence Byrd Inc. 36 Canadian Tax Principles Ordering of Deductions And Losses • Ordering In Computing Taxable Income (Individuals Only) – ITA 110: Stock Options And Other – ITA 110.2: Retroactive Lump Sum Payments – ITA 110.6: Lifetime Capital Gains Deduction – ITA 110.7: Northern Residents Deductions – ITA 111: Loss Carry Overs (In Order Incurred) Copyright © 2014, Clarence Byrd Inc. 37 Canadian Tax Principles Tax On Split Income • Applicability – Under 18 At End Of Year – Types of income • Private Company Dividends, Shareholder Benefits, Private Partnership And Trust Allocations (If Related Party) Partnership • Capital gains in some circumstances Copyright © 2014, Clarence Byrd Inc. 38 Canadian Tax Principles Tax On Split Income • Application – Federal Tax At 29 Percent – Deductible From Total Income – Only Credits Are For Dividends And Foreign Tax Copyright © 2014, Clarence Byrd Inc. 39 Canadian Tax Principles Tax On Split Income • Example: Example: A 14 year old individual receives non-eligible dividends from a private company in the amount of $18,000. In addition, she has employment income of $8,500 from her summer job. She has no deductions in the calculation of her Taxable Income. Taxable Copyright © 2014, Clarence Byrd Inc. 40 Canadian Tax Principles Tax On Split Income Regular Tax Payable Dividends (125%)($18,000) $22,500 Employment Income 8,500 Total Income $31,000 Split Income Deduction ( 22,500) Net And Taxable Income $ 8,500 Tax At 15% $ 1,275 Personal Credit ( 1,656) Regular Tax Payable Copyright © 2014, Clarence Byrd Inc. Nil 41 Canadian Tax Principles Tax On Split Income Dividends Dividends (29%)($22,500) (29%)($22,500) Dividend Tax Credit (2/3)($4,500) Tax Otherwise Determined Copyright © 2014, Clarence Byrd Inc. $ 6,525 ( 3,000) $ 3,525 42 Canadian Tax Principles Tax On Split Income Regular Tax Payable Tax on split income Total Tax Payable Copyright © 2014, Clarence Byrd Inc. Nil $3,525 $3,525 43 Canadian Tax Principles Transfer Of Dividends to a Spouse – Example: Mr. Bartlett’s only income consists of $13,000 in eligible Mr. only dividends received from taxable Canadian corporations. As a consequence of this income receipt, Mrs. Bartlett is not able to claim a spousal tax credit. Mrs. Bartlett has other income of $25,000. Copyright © 2014, Clarence Byrd Inc. 44 Canadian Tax Principles Transfer Of Dividends to a Spouse • Transfer: – Mrs. Bartlett Gets Full Spousal Credit Of $1,656 – Taxable Dividends = $17,940 [(138%)($13,000)] – Pays Taxes Of [(15%)($17,940)] = $2,691 – Gets Dividend Tax Credit = $2,695 [(6/11)($4,940)] – Decrease in Tax Payable = $1,660 ($2,691 - $1,656 Decrease $2,695) $2,695) Copyright © 2014, Clarence Byrd Inc. 45 Canadian Tax Princip...
View Full Document

Ask a homework question - tutors are online