Mrs. Perry's total income consisted of $10,000 in eligible dividends received from taxable Canadian corporations. Mrs. Perry's basic personal tax credit and dividend tax credits are sufficient to eliminate all of her Tax Payable. Because she receives these dividends, Mr. Perry is not able to claim a spousal tax credit. Mr. Perry's income is such that any additional income from the transfer would be taxed at the federal rate of 20.5 percent. By what amount would Mr. Perry's Tax Payable increase or decrease if Mrs. Perry's dividends were transferred to him?

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The dividend tax credit is a non-refundable tax credit that reduces the amount of tax payable on eligible dividends. The basic personal tax credit is a refundable tax credit that reduces the amount of tax payable on all types of income. In this case, Mrs. Perry's dividend tax credits and basic personal tax credit are sufficient to eliminate all of her Tax Payable. Therefore, if the dividends were transferred to Mr. Perry, he would be able to claim the dividend tax credits, which would reduce his Tax Payable by $1,228.

Mrs Perry's Total Income Consisted of $10,000 in Eligible Dividends