Question

Martin aggerwal has a 30% 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 subject to the 33% federal income tax rate. which of the following statements is correct?

a. Martin will have capital gains of $6,300, a federal dividend tax credit of $933, and a charitable donations tax credit of $494.
b. Martin will have taxable capital gains of$6,300, a federal dividend tax credit of $467, and a charitable donations tax credit of $494.
c. Martin will have taxable capital gains of $6,300, a federal dividend tax credit of $467, and a charitable donations tax credit of $522.
d. Martin will have taxable capital gains of$12,600, a federal dividend tax credit of$467, and a charitable donations tax credit of $522

Answer 1

Martin will have taxable capital gains of $12,600, a federal dividend tax credit of $5,799.42, and no charitable donations tax credit.

Step-by-step explanation:

To determine Martin's taxable capital gains, we need to multiply his ownership percentage by the total capital gains of the partnership. Since Martin has a 30% interest, his taxable capital gains are $42,000 * 0.30 = $12,600.

Next, we need to calculate Martin's federal dividend tax credit. The federal dividend tax credit is calculated by multiplying the dividend income by the gross-up rate and then applying the federal dividend tax rate. In this case, Martin received $15,000 in non-eligible dividends. The gross-up rate for non-eligible dividends is 16%, so his grossed-up dividend income is $15,000 * 1.16 = $17,400. The federal dividend tax rate for grossed-up non-eligible dividends is 33.33%. Therefore, Martin's federal dividend tax credit is $17,400 * 0.3333 = $5,799.42.

Lastly, Martin did not make any charitable donations personally, so he does not qualify for a charitable donations tax credit. Therefore, the correct statement is option d. Martin will have taxable capital gains of $12,600, a federal dividend tax credit of $5,799.42, and no charitable donations tax credit.