Sarah receives an eligible dividend of $1,000 from a Canadian public corporation. Assuming a combined federal and provincial marginal tax rate of 30%, which of the following best estimates her after-tax income from this dividend, considering the dividend tax credit and gross-up?

Question: Sarah receives an eligible dividend of $1,000 from a Canadian public corporation. Assuming a combined federal and provincial marginal tax rate of 30%, which of the following best estimates her after-tax income from this dividend, considering the dividend tax credit and gross-up?

Answer options: ✅ Approximately $820

• Approximately $700
• Approximately $600
• Approximately $1,000

Correct answer: Approximately $820

Explanation: The eligible dividend will be grossed up, then tax calculated, and finally the dividend tax credit applied, resulting in a significantly lower effective tax rate than the nominal marginal rate for Canadian dividends.