Why is the dividend tax credit the full gross up amount?Problem
Victor is confused, so he has come to you for advice. He has heard that not all dividends are treated
the same, so he would like you to explain how the following are taxed to decide where he should invest
his money. Victor has income that will result in the income below being taxed in the highest tax bracket,
which has a combined federal and provincial marginal tax rate of for the province he lives in
Assume the following:
$ of dividends from Canadian public companies.
$ of dividends from Canadian private companies earning active business income taxed at
a low rate.
$ of dividends from foreign public companies. $ was deducted at source and remitted to
the foreign government.
The provincial dividend tax credit is for Canadian private company dividends earning active
business income taxed at the low rate and for public company dividends.
