Which of the following scenarios is not an allowable tax transaction?
A)The taxable income of ABC Co., (a Canadian controlled private corporation), is reduced by the amount of dividends received from other taxable Canadian corporations.
B)An individual's taxable income on their T1 tax return is reduced by the amount of dividends received from a taxable Canadian corporation.
C)A donation of $5,000 made to a registered charity by XYZ Co.in the year is used to reduce XYZ's $100,000 net income for tax purposes to a taxable income of $95,000.
D)Small Co., (a Canadian controlled private corporation), has a net income for tax purposes of $125,000 in 2020, an $8,000 non-capital loss from 2019, and $10,000 of taxable dividends received from a Canadian corporation in 2020.The non-capital loss and the dividends can both be deducted from Small Co.'s net income for tax purposes in 2020.

Question

Quizplus · Accepted Answer

Dividends received by an individual from a taxable Canadian corporation are not directly deducted from the individual's taxable income. Instead, they are included in income and then a dividend tax credit is applied to account for the tax already paid at the corporate level, which effectively lowers the tax payable but does not reduce the taxable income directly.

Which of the Following Scenarios Is Not an Allowable Tax