A shareholder receives a dividend of $5000 and faces a personal tax rate of 40%. If the imputation credit is $2000, then the tax liability is $800.

Name: A shareholder receives a dividend of $5000 and faces a personal tax rate of 40%. If the imputation credit is $2000, then the tax liability is $800.
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Quizplus · Accepted Answer

The imputation credit reduces the shareholder's tax liability by $2000, so the shareholder only has to pay tax on $3000 ($5000 - $2000). At a tax rate of 40%, the tax liability is $800 ($3000 x 0.40).

A Shareholder Receives a Dividend of $5000 and Faces a Personal