Reference no: EM132807821

Problem 1. Sue Smith received $100 dividends, which are subject to a gross-up factor of 45% and a dividend tax credit of 19% on taxable dividends. Sue Smith has a marginal federal tax rate of 29%. The dividend tax credit is:

i) $29.00
ii) $27.55
iii) $25.00
iv) $16.67
v) $13.33

Problem 2. A new machine costing $50,000 qualifies for an investment tax credit of 20%. It replaces an existing machine with a market value of $5,000. If the existing machine has a book value of $8,000 and both machines belong to the same asset class, the incremental base for the calculation of capital cost allowance for the new machine is:

i) $50,000
ii) $45,000
iii) $42,000
iv) $35,000
v) $32,000