You own 50 units of a real estate investment trust (REIT)and 50 shares of a public corporation.The REIT earns $6.00 per unit.The corporation earns $4.00 per share before taxes.The corporate tax rate is 25%,your personal tax rate is 35%,and the tax rate on dividend income is 15%.What is the total after-tax income you receive,if everything is held outside a TFSA?

Question

Quizplus · Accepted Answer

- For the REIT: 
    - Earnings per unit = $6.00 
    - Total earnings = 50 units x $6.00/unit = $300.00 
    - Taxable income = $300.00 
    - Tax paid = $300.00 x 0.25 = $75.00 
    - After-tax income = $300.00 - $75.00 = $225.00 
- For the corporation: 
    - Earnings per share = $4.00 
    - Total earnings = 50 shares x $4.00/share = $200.00 
    - Corporate tax paid = $200.00 x 0.25 = $50.00 
    - After-tax earnings = $200.00 - $50.00 = $150.00 
    - Dividend income = $150.00 x (1 - 0.15) = $127.50 
    - Personal tax paid = $127.50 x 0.35 = $44.63 
    - After-tax dividend income = $127.50 - $44.63 = $82.87 
- Total after-tax income = $225.00 + $82.87 = $307.87 
Therefore, the closest option to the calculated total after-tax income is option C ($322.50).

You Own 50 Units of a Real Estate Investment Trust