Partial imputation system specifics

Partial imputation system specifics

• A. It gives full tax credit equal to corporate tax paid
• B. It gives no tax credit
• C. It gives credit only for capital gains
• D. It provides a partial tax credit equal to part of the corporate tax paid

Answer: (D)

Partial imputation systems determine how much of the corporate tax paid by a company is credited to shareholders against the tax due on received dividends. In these systems, the shareholder gets a credit, but only up to part of the corporate tax paid; the remainder of the tax on the dividend is not covered by the credit. This differs from a full imputation system, where the entire corporate tax paid can be credited, and from systems that provide no credit at all. Credits tied to capital gains aren’t the standard feature of these schemes. So the statement that it provides a partial tax credit equal to part of the corporate tax paid best describes a partial imputation system.

Partial imputation systems determine how much of the corporate tax paid by a company is credited to shareholders against the tax due on received dividends. In these systems, the shareholder gets a credit, but only up to part of the corporate tax paid; the remainder of the tax on the dividend is not covered by the credit. This differs from a full imputation system, where the entire corporate tax paid can be credited, and from systems that provide no credit at all. Credits tied to capital gains aren’t the standard feature of these schemes. So the statement that it provides a partial tax credit equal to part of the corporate tax paid best describes a partial imputation system.