IFSE Canadian Investment Funds Course (CIFC) Practice Test

To determine how much of Franklin's income is taxed at his federal marginal tax rate, we first need to calculate his taxable income. Taxable income is derived by subtracting any deductions from total income.

In this case, Franklin's total income is $98,000 and he has deductions of $14,000. So, his taxable income would be:

Taxable Income = Total Income - Deductions

Taxable Income = $98,000 - $14,000

Taxable Income = $84,000

The federal tax system in Canada operates on a marginal tax rate, meaning different portions of income are taxed at different rates based on predefined income brackets. The question is essentially seeking to understand how much of Franklin's income, after considering deductions, falls under the highest applicable tax rate.

Once we have determined that Franklin's taxable income is $84,000, we can see which tax bracket this amount falls into. The tax brackets for federal personal income taxes can change, but typically, the first portions of income are taxed at lower rates, and the latter portions at higher rates.

Thus, since the total taxable income is $84,000, none of his income exceeds this amount for the purpose of calculating tax at the marginal rate