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Tax question on dividend
I'm buying a house, my mom is lending me the money for a down payment from her small business. She is paying it out to me as a dividend, and then I pay it back over the next few years. Anyways, since I'm receiving this dividend, I believe it counts as income, I have to pay tax on it. The question is, how much tax will I pay on it? Assume my annual income will be 50k, with this dividend for 10k. Will I pay 30% tax on it as if it was normal income? Hope this makes sense.
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Registered User
Depends on what type of dividend it is, which depends on how much money your mom's business makes.
Eligible Dividends are grossed up by 45% and you are given a tax credit of 27.5% of the dividend you receive.
Non-eligible dividends are grossed up by 25% and you are given a tax credit of 16 2/3% of the dividend you receive.
The grossed up dividend is taxed at your marginal tax rate and then your taxes owing are reduced by the credit.
Ex. 100 eligible dividend
Gross up 45%: 145
Tax at 30% marginal tax rate: $43.5
Less: Tax credit of 27.5% of dividend- $27.50
Total tax payable: $16
Dividend: $100
Net dividend received: $84
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered."
-Thomas Jefferson 1802
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You need to be a little bit more clear. Is it a loan from your mom's company OR a dividend payment to you as you're an officer/shareholder/owner/partner/etc.
"Science without religion is lame, religion without science is blind." - Albert Einstein
Registered User
If you are not a shareholder then you cannot receive a dividend and as such, it would either be a loan to you or a dividend to your mom.
I think the loan may be classified as a non-arms length transaction and may be taken into income though- I'll have to check on that one.
Ironically enough, the section in the income tax act on arms length transactions is 69.
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered."
-Thomas Jefferson 1802
Registered User
It is a non-arms length transaction if you take a loan with no terms. You will have to pay interest on the money as you would from a bank to keep it arms length. There is a prescribed rate that you can use I believe, so the interest cost would be less then most bank rates for short term loans.
Gotta love boost
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