Martin Aggerwal has a 30 percent interest in a partnership. During the current year, the partnership realized capital gains of $42,000, received non-eligible dividends of $15,000, and made charitable donations of $6,000. Martin has made no charitable donations personally. He has no income that will be taxed at 33 percent at the federal level. Which of the following statements is correct?
A)Martin will report taxable capital gains of $6,300, will have a federal dividend tax credit of $467, and a charitable donations tax credit of $494.
B)Martin will report taxable capital gains of $12,600, will have a federal dividend tax credit of $467, and a charitable donations tax credit of $522.
C)Martin will report taxable capital gains of $6,300, will have a federal dividend tax credit of $933, and a charitable donations tax credit of $494.
D)Martin will report taxable capital gains of $6,300, will have a federal dividend tax credit of $467, and a charitable donations tax credit of $522.

Question

Quizplus · Accepted Answer

Martin's share of the capital gains is 30% of $42,000, which is $12,600. However, only 50% of capital gains are taxable, so his taxable capital gains are $6,300. For the non-eligible dividends, the federal dividend tax credit is roughly 15.0198% of the grossed-up amount (gross-up rate for non-eligible dividends is 15% for the year in question). Martin's share of the dividends is 30% of $15,000, which is $4,500. The grossed-up amount is $4,500 * 1.15 = $5,175. The tax credit is approximately 15.0198% of $5,175, which is about $777. However, the correct federal dividend tax credit provided in the options is $467, indicating a possible simplification or error in the calculation within the provided choices. For the charitable donations, Martin's share is 30% of $6,000, which is $1,800. The federal charitable donations tax credit is 15% on the first $200 and 29% on the remaining amount. Since Martin has no income taxed at the 33% rate, the 29% rate applies to the amount over $200. The tax credit calculation would be $200 * 15% + ($1,800 - $200) * 29% = $30 + $464 = $494. Therefore, the correct statement is A, with the understanding that the dividend tax credit calculation provided aligns with the options given, despite not matching the expected calculation based on typical tax rules.

Martin Aggerwal Has a 30 Percent Interest in a Partnership