Which of the following scenarios is not allowed?
A) The taxable income of ABC Co. is reduced by the amount of dividends received from other taxable Canadian corporations.
B)Mr. Blue's taxable income is reduced by the amount of dividends received from a taxable Canadian corporation.
C) A donation of $5,000 to a registered charity by XYZ Co. in 20x0 is used to reduce XYZ's 20x0 $100,000 net income for tax purposes to a taxable income of $95,000.
D) Little Co. has an $8,000 non-capital loss from a loss that arose in 20x0 and $10,000 of taxable dividends received from a Canadian corporation in 20x1, both of which will be deducted from Little Co.'s 20x1 net income for tax purposes.

Question

Which of the following scenarios is not allowed?
A) The taxable income of ABC Co. is reduced by the amount of dividends received from other taxable Canadian corporations. 
B)Mr. Blue's taxable income is reduced by the amount of dividends received from a taxable Canadian corporation.
C) A donation of $5,000 to a registered charity by XYZ Co. in 20x0 is used to reduce XYZ's 20x0 $100,000 net income for tax purposes to a taxable income of $95,000.
D) Little Co. has an $8,000 non-capital loss from a loss that arose in 20x0 and $10,000 of taxable dividends received from a Canadian corporation in 20x1, both of which will be deducted from Little Co.'s 20x1 net income for tax purposes.

Quizplus · Accepted Answer

Dividends received by individuals from taxable Canadian corporations are subject to a gross-up and tax credit mechanism, not a direct reduction of taxable income.

Which of the Following Scenarios Is Not Allowed