Question

Which of the following statements is correct? Canadian Tax

Group of answer choices

Federal Tax Payable = The gross up on dividends received minus the dividend tax credit.

Net Property Income = Dividends received plus the gross-up minus the dividend tax credit.

Federal Tax Payable = Federal tax on grossed-up dividends minus the dividend tax credit.

Net Property Income = Dividends received minus the gross-up minus the dividend tax credit.

Answer 1

Following Statements are Correct

1) Federal Tax Payable = Federal tax on grossed-up dividends minus the dividend tax credit.
If you are a shareholder in a Canadian corporation, you may receive profits from those shares that are called dividend income. The dividends should be reported on your tax return. Typically, you also may be eligible to receive the Federal Dividend Tax Credit. This is a non-refundable credit that reduces the amount of tax you owe

The tax credit is then applied against the tax owed on the grossed-up dividends.

2)  Net Property Income =  Dividends received plus the gross-up minus the dividend tax credit.

Your dividend income gets added to your taxable income. In addition to reporting the amount you earned in dividend income, you should account for a gross-up. Think of a gross-up as an increase to account for applicable taxes.