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A year and half ago, Max purchased 5,000 shares in a mutual fund called Epic Inc. for $15.75/share. Due to COVID-19, the stock was an epic failure and Max decided to sell 3,000 shares on November 30, 2021, when the share price was at $9.55/share. His investment broker counselled him not to sell as the fund was a back-end loaded fund.

A year and half ago, Max purchased 5,000 shares in a mutual fund called Epic Inc. for $15.75/share. Due to COVID-19, the stock was an epic failure and Max decided to sell 3,000 shares on November 30, 2021, when the share price was at $9.55/share. His investment broker counselled him not to sell as the fund was a back-end loaded fund.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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TABLE A Combined Federal & Quebec Tax Brackets and Tax Rates 2021 Marginal Tax Rates 2020 Marginal Tax Rates Canadian Dividends Canadian Dividends Other Capital Other Capital Income Gains Non- Income Gains Non- Eligible Eligible 2021 Taxable Income Eligible 2020 Taxable Income Eligible 27.53% 13.70% 4.53% 18.37% |27.53% 13.76% 4.53% first $45, 105 first $44,545 17.50% over $45,105 up to $49,020 32.53% 16.20% 11.43% over $49,020 up to $90,200 37.12% 18.50% 17.77% 24.12% over $44,545 up to $48,535 32.53% 16.26% 11.43% 23.25% 29.40% over $48,535 up to $89,080 37.12% 18.56% 17.77% 28.53% over $90.200 up to $98,040 41.12% 20.56% 23.29% 34.00% over $89,080 up to $97,069 41.12% 20.56% 23.29% 33.13% over $08,040 up to $109,755 45.71% 22.86% 29.62% 39.28% over S97,089 up to $108,390 45.71% 22.86% 29.62% 38.41% over $109,755 up to $151,978 47.46% 23.73% 32.04% 41.30% over $108,390 up to $150,473 47.46% 23.73% 32.04% 40.42% over $151,978 up to $216,511(1) over $150,473 up to $214,368(1) 50.23% 25.12% 35.86% 44.48% 50.15% 25.07% 35.75% 43.51% over $216,511 53.31% 26.65% 40.10% 48.02% over $214,368 53.31% 26.65% 40.10% 47.14%
Transcribed Image Text:TABLE A Combined Federal & Quebec Tax Brackets and Tax Rates 2021 Marginal Tax Rates 2020 Marginal Tax Rates Canadian Dividends Canadian Dividends Other Capital Other Capital Income Gains Non- Income Gains Non- Eligible Eligible 2021 Taxable Income Eligible 2020 Taxable Income Eligible 27.53% 13.70% 4.53% 18.37% |27.53% 13.76% 4.53% first $45, 105 first $44,545 17.50% over $45,105 up to $49,020 32.53% 16.20% 11.43% over $49,020 up to $90,200 37.12% 18.50% 17.77% 24.12% over $44,545 up to $48,535 32.53% 16.26% 11.43% 23.25% 29.40% over $48,535 up to $89,080 37.12% 18.56% 17.77% 28.53% over $90.200 up to $98,040 41.12% 20.56% 23.29% 34.00% over $89,080 up to $97,069 41.12% 20.56% 23.29% 33.13% over $08,040 up to $109,755 45.71% 22.86% 29.62% 39.28% over S97,089 up to $108,390 45.71% 22.86% 29.62% 38.41% over $109,755 up to $151,978 47.46% 23.73% 32.04% 41.30% over $108,390 up to $150,473 47.46% 23.73% 32.04% 40.42% over $151,978 up to $216,511(1) over $150,473 up to $214,368(1) 50.23% 25.12% 35.86% 44.48% 50.15% 25.07% 35.75% 43.51% over $216,511 53.31% 26.65% 40.10% 48.02% over $214,368 53.31% 26.65% 40.10% 47.14%
A year and half ago, Max purchased 5,000 shares in a mutual fund called Epic Inc. for $15.75/share. Due to COVID-19, the stock was an epic failure and Max decided to sell 3,000 shares on November 30, 2021, when the share price was at $9.55/share. His investment broker counselled him not to sell as the fund was a back-end loaded fund. Year funds are redeemed/sold Deferred sales charge Within the first year 6% In the second year 5% In the third year 4% In the fourth year 3% In the fifth year 2% In the sixth year 1% After the sixth year 0% a) What is the amount that Max will receive for the sale of these shares (ignore income taxes)? Calculate the amount that Max will receive Applicable charge=5% Number of shares to be sold=3000 The investment value of these shares=3000*15.75=$47,250 The back end charge=$47,250*5%=$2,362.5 The fund received on selling=3000*$9.55=$28,650 Net receipt=28,650-2,362.5-$26,287.5 b) Knowing that capital losses are applied against capital gains, what would be the overall taxes payable if Max sold shares in another company called Save The Day Inc. which resulted in a capital gain in 2021 of $50,000 and the shares in point a)? Max is a resident of Quebec and in the highest tax bracket. See Table A. Calculate the amount of taxes payable on the sale of the shares:
Transcribed Image Text:A year and half ago, Max purchased 5,000 shares in a mutual fund called Epic Inc. for $15.75/share. Due to COVID-19, the stock was an epic failure and Max decided to sell 3,000 shares on November 30, 2021, when the share price was at $9.55/share. His investment broker counselled him not to sell as the fund was a back-end loaded fund. Year funds are redeemed/sold Deferred sales charge Within the first year 6% In the second year 5% In the third year 4% In the fourth year 3% In the fifth year 2% In the sixth year 1% After the sixth year 0% a) What is the amount that Max will receive for the sale of these shares (ignore income taxes)? Calculate the amount that Max will receive Applicable charge=5% Number of shares to be sold=3000 The investment value of these shares=3000*15.75=$47,250 The back end charge=$47,250*5%=$2,362.5 The fund received on selling=3000*$9.55=$28,650 Net receipt=28,650-2,362.5-$26,287.5 b) Knowing that capital losses are applied against capital gains, what would be the overall taxes payable if Max sold shares in another company called Save The Day Inc. which resulted in a capital gain in 2021 of $50,000 and the shares in point a)? Max is a resident of Quebec and in the highest tax bracket. See Table A. Calculate the amount of taxes payable on the sale of the shares:
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