A fund's T3 slip shows $500 as 'Other Income' and $300 as 'Eligible Dividends' to an investor in a non-registered account. What is the total amount that will be included in the investor's taxable income for the year, considering standard Canadian tax rules for these types of distributions?

Question: A fund's T3 slip shows $500 as 'Other Income' and $300 as 'Eligible Dividends' to an investor in a non-registered account. What is the total amount that will be included in the investor's taxable income for the year, considering standard Canadian tax rules for these types of distributions?

Answer options: ✅ More than $800, due to the gross-up of eligible dividends.

• Exactly $800, as both are fully taxable.
• Less than $800, due to partial taxability of eligible dividends.
• $500, as eligible dividends are generally tax-exempt.

Correct answer: More than $800, due to the gross-up of eligible dividends.

Explanation: 'Other Income' is fully taxable. 'Eligible Dividends' are subject to a gross-up (e.g., 38% for federal) to determine the taxable amount, which is then eligible for a dividend tax credit. Therefore, the total taxable income will be the $500 plus the grossed-up dividend amount, making it more than $800.