Andy Griffin would like to invest $150,000 in his friend Ernie's company, which was founded and o foreign country. This investment would give Andy 25% ownership of the company. An annual divid
$15,000 (Canadian funds) is anticipated.

Andy's personal marginal tax rate is 45% on regular income, 28% on eligible dividends, and 36% on non-eligible dividends. The foreign company is subject to a tax rate of 38% on all business income. dividends received by Andy, personally, will be subject to a 15% withholding tax.

Required:

1) Determine the total tax liability (foreign and Canadian) that Andy will be subject to upon receivin dividends from the foreign company.
2) How would your answer in part 1 change if Andy established a Canadian holding company to purc shares, (subject to a 5% withholding tax on dividends received)?
3) What would Andy's after-tax proceeds be if he received eligible dividend income from the holding company?

Question

Andy Griffin would like to invest $150,000 in his friend Ernie's company, which was founded and o foreign country. This investment would give Andy 25% ownership of the company. An annual divid
$15,000 (Canadian funds) is anticipated.

Andy's personal marginal tax rate is 45% on regular income, 28% on eligible dividends, and 36% on non-eligible dividends. The foreign company is subject to a tax rate of 38% on all business income. dividends received by Andy, personally, will be subject to a 15% withholding tax.

Required:

1)	Determine the total tax liability (foreign and Canadian) that Andy will be subject to upon receivin dividends from the foreign company.
2)	How would your answer in part 1 change if Andy established a Canadian holding company to purc shares, (subject to a 5% withholding tax on dividends received)?
3)	What would Andy's after-tax proceeds be if he received eligible dividend income from the holding company?

Quizplus · Accepted Answer

The Answer of Andy Griffin would like to invest $150,000 in his friend Ernie's company, which was founded and o foreign country. This investment would give Andy 25% ownership of the company. An annual divid
$15,000 (Canadian funds) is anticipated.

Andy's personal marginal tax rate is 45% on regular income, 28% on eligible dividends, and 36% on non-eligible dividends. The foreign company is subject to a tax rate of 38% on all business income. dividends received by Andy, personally, will be subject to a 15% withholding tax.

Required:

1)	Determine the total tax liability (foreign and Canadian) that Andy will be subject to upon receivin dividends from the foreign company.
2)	How would your answer in part 1 change if Andy established a Canadian holding company to purc shares, (subject to a 5% withholding tax on dividends received)?
3)	What would Andy's after-tax proceeds be if he received eligible dividend income from the holding company?

Andy Griffin Would Like to Invest $150,000 in His Friend