A Canadian resident earns $70,000 in income from employment and also has $5,000 in eligible dividends from a Canadian public corporation. Assuming a 38% gross-up rate for eligible dividends and a 15.02% federal dividend tax credit rate, what is the 'grossed-up' amount of the dividend that will be included in the client's taxable income?

Question: A Canadian resident earns $70,000 in income from employment and also has $5,000 in eligible dividends from a Canadian public corporation. Assuming a 38% gross-up rate for eligible dividends and a 15.02% federal dividend tax credit rate, what is the 'grossed-up' amount of the dividend that will be included in the client's taxable income?

Answer options:

• $5,000
• $5,750 ✅ $6,900
• $7,500

Correct answer: $6,900

Explanation: The actual dividend amount is $5,000. The gross-up is 38% of the actual dividend. So, $5,000 * 1.38 = $6,900. This $6,900 is the amount included in taxable income. The income from employment is separate and doesn't affect the gross-up calculation.