A business owner pays his adult daughter, who works 10 hours per week and is over 25 years old, a dividend of $10,000 from the family corporation. The daughter's involvement does not meet the 'significant labour contribution' test. How will this income generally be taxed under TOSI?

Question: A business owner pays his adult daughter, who works 10 hours per week and is over 25 years old, a dividend of $10,000 from the family corporation. The daughter's involvement does not meet the 'significant labour contribution' test. How will this income generally be taxed under TOSI?

Answer options:

• Taxed as regular dividend income at her marginal rate. ✅ Taxed at the highest marginal federal tax rate for individuals.
• Split equally between the business owner and the daughter.
• Exempt from tax due to the daughter being an adult.

Correct answer: Taxed at the highest marginal federal tax rate for individuals.

Explanation: If an adult child aged 18 or older does not meet the 'significant labour contribution' test (which generally means working 20 hours/week or more) or other exceptions, the split income received from a related business will be taxed at the highest marginal federal tax rate for individuals under the TOSI rules.