Canadian Income Taxation
2022–2023 25th Edition
ST
SOLUTIONS
UV
IA
MANUAL
_A
William Buckwold
PP
Joan Kitunen
Matthew Roman
RO
────────────────────────────────────────────────────
Comprehensive Solutions Manual for Instructors
VE
and Students
© William Buckwold, Joan Kitunen & Matthew Roman.
D?
All rights reserved. Reproduction or distribution without permission is prohibited.
?
© Successhands
, Solutions Manual for Canadian Income Taxation 2022–2023 (25th Edition)
William Buckwold, Joan Kitunen & Matthew Roman
Chapter 1. Taxation—Its Role in Decision Making
ST
Chapter 2. Fundamentals of Tax Planning
Chapter 3. Liability for Tax, Income Determination, and Administration of the Income Tax
System
UV
Chapter 4. Income from Employment
Chapter 5. Income from Business
Chapter 6. The Acquisition, Use, and Disposal of Depreciable Property
IA
Chapter 7. Income from Property
Chapter 8. Gains and Losses on the Disposition of Capital Property—Capital Gains
_A
Chapter 9. Other Income, Other Deductions, and Special Rules for Completing Net Income for
Tax Purposes
Chapter 10. Individuals: Determination of Taxable Income and Taxes Payable
PP
Chapter 11. Corporations—An Introduction
Chapter 12. Organization, Capital Structures, and Income Distributions of Corporations
RO
Chapter 13. The Canadian-Controlled Private Corporation
Chapter 14. Multiple Corporations and Their Reorganization
Chapter 15. Partnerships
VE
Chapter 16. Limited Partnerships and Joint Ventures
Chapter 17. Trusts
Chapter 18. Business Acquisitions and Divestitures—Assets versus Shares
D?
Chapter 19. Business Acquisitions and Divestitures—Tax-Deferred Sales
Chapter 20. Domestic and International Business Expansion
Chapter 21. Tax Aspects of Corporate Financing
?
Chapter 22. Introduction to GST/HST
Chapter 23. Business Valuations
© Successhands
, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2022-2023 Ed.
Solution Manual for Canadian Income Taxation 2022-2023 25th Edition
by William Buckwold, Joan Kitunen, Matthew Roman
SMT
CHAPTER 1
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
UEDV
Review Questions
1. If income tax is imposed after profits have been determined, why is taxation relevant to
business decision making?
2. Most business decisions involve the evaluation of alternative courses of action. For
ICAO
example, a marketing manager may be responsible for choosing a strategy for
establishing sales in new geographical territories. Briefly explain how the tax factor can
be an integral part of this decision.
_NA
3. What are the fundamental variables of the income tax system that decision-makers
should be familiar with so that they can apply tax issues to their areas of responsibility?
4. What is an ―after-tax‖ approach to decision making?
PNPO
RISO
SVE
EDU
?R?
Copyright © 2022 McGraw-Hill Education Ltd. 1
Instructor Solutions Manual Chapter One
, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2022-2023 Ed.
Solutions to Review Questions
R1-1 Once profit is determined, the Income Tax Act determines the amount of income tax that
results. However, at all levels of management, alternative courses of action are evaluated.
SMT
In many cases, the choice of one alternative over the other may affect both the amount
and the timing of future taxes on income generated from that activity. Therefore, the
person making those decisions has a direct input into future after-tax cash flow.
Obviously, decisions that reduce or postpone the payment of tax affect the ultimate return
on investment and, in turn, the value of the enterprise. Including the tax variable as a part
UEDV
of the formal decision process will ultimately lead to improved after-tax cash flow.
R1-2 Expansion can be achieved in new geographic areas through direct selling, or by
establishing a formal presence in the new territory with a branch office or a separate
corporation. The new territories may also cross provincial or international boundaries.
Provincial income tax rates vary amongst the provinces. The amount of income that is
subject to tax in the new province will be different for each of the three alternatives
ICAO
mentioned above. For example, with direct selling, none of the income is taxed in the new
province, but with a separate corporation, all of the income is taxed in the new province.
Because the tax cost is different in each case, taxation is a relevant part of the decision
and must be included in any cost-benefit analysis that compares the three alternatives
_NA
[Reg. 400-402.1].
R1-3 A basic understanding of the following variables will significantly strengthen a decision
maker's ability to apply tax issues to their area of responsibility.
PNPO
Types of Income - Employment, Business, Property, Capital gains
Taxable Entities - Individuals, Corporations, Trusts
Alternative Business - Corporation, Proprietorship, Partnership, Limited
Structures partnership, Joint arrangement, Income trust
RISO
Tax Jurisdictions - Federal, Provincial, Foreign
R1-4 All cash flow decisions, whether related to revenues, expenses, asset acquisitions or
divestitures, or debt and equity restructuring, will impact the amount and timing of the tax
cost. Therefore, cash flow exists only on an after tax basis, and, the tax impacts whether
SVE
or not the ultimate result of the decision is successful. An after-tax approach to
decision-making requires each decision-maker to think "after-tax" for every decision at the
time the decision is being made, and, to consider alternative courses of action to minimize
EDU
the tax cost, in the same way that decisions are made regarding other types of costs.
Failure to apply an after-tax approach at the time that decisions are made may provide
inaccurate information for evaluation, and, result in a permanently inefficient tax structure.
?R?
Copyright © 2022 McGraw-Hill Education Ltd. 2
Instructor Solutions Manual Chapter One
2022–2023 25th Edition
ST
SOLUTIONS
UV
IA
MANUAL
_A
William Buckwold
PP
Joan Kitunen
Matthew Roman
RO
────────────────────────────────────────────────────
Comprehensive Solutions Manual for Instructors
VE
and Students
© William Buckwold, Joan Kitunen & Matthew Roman.
D?
All rights reserved. Reproduction or distribution without permission is prohibited.
?
© Successhands
, Solutions Manual for Canadian Income Taxation 2022–2023 (25th Edition)
William Buckwold, Joan Kitunen & Matthew Roman
Chapter 1. Taxation—Its Role in Decision Making
ST
Chapter 2. Fundamentals of Tax Planning
Chapter 3. Liability for Tax, Income Determination, and Administration of the Income Tax
System
UV
Chapter 4. Income from Employment
Chapter 5. Income from Business
Chapter 6. The Acquisition, Use, and Disposal of Depreciable Property
IA
Chapter 7. Income from Property
Chapter 8. Gains and Losses on the Disposition of Capital Property—Capital Gains
_A
Chapter 9. Other Income, Other Deductions, and Special Rules for Completing Net Income for
Tax Purposes
Chapter 10. Individuals: Determination of Taxable Income and Taxes Payable
PP
Chapter 11. Corporations—An Introduction
Chapter 12. Organization, Capital Structures, and Income Distributions of Corporations
RO
Chapter 13. The Canadian-Controlled Private Corporation
Chapter 14. Multiple Corporations and Their Reorganization
Chapter 15. Partnerships
VE
Chapter 16. Limited Partnerships and Joint Ventures
Chapter 17. Trusts
Chapter 18. Business Acquisitions and Divestitures—Assets versus Shares
D?
Chapter 19. Business Acquisitions and Divestitures—Tax-Deferred Sales
Chapter 20. Domestic and International Business Expansion
Chapter 21. Tax Aspects of Corporate Financing
?
Chapter 22. Introduction to GST/HST
Chapter 23. Business Valuations
© Successhands
, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2022-2023 Ed.
Solution Manual for Canadian Income Taxation 2022-2023 25th Edition
by William Buckwold, Joan Kitunen, Matthew Roman
SMT
CHAPTER 1
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
UEDV
Review Questions
1. If income tax is imposed after profits have been determined, why is taxation relevant to
business decision making?
2. Most business decisions involve the evaluation of alternative courses of action. For
ICAO
example, a marketing manager may be responsible for choosing a strategy for
establishing sales in new geographical territories. Briefly explain how the tax factor can
be an integral part of this decision.
_NA
3. What are the fundamental variables of the income tax system that decision-makers
should be familiar with so that they can apply tax issues to their areas of responsibility?
4. What is an ―after-tax‖ approach to decision making?
PNPO
RISO
SVE
EDU
?R?
Copyright © 2022 McGraw-Hill Education Ltd. 1
Instructor Solutions Manual Chapter One
, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2022-2023 Ed.
Solutions to Review Questions
R1-1 Once profit is determined, the Income Tax Act determines the amount of income tax that
results. However, at all levels of management, alternative courses of action are evaluated.
SMT
In many cases, the choice of one alternative over the other may affect both the amount
and the timing of future taxes on income generated from that activity. Therefore, the
person making those decisions has a direct input into future after-tax cash flow.
Obviously, decisions that reduce or postpone the payment of tax affect the ultimate return
on investment and, in turn, the value of the enterprise. Including the tax variable as a part
UEDV
of the formal decision process will ultimately lead to improved after-tax cash flow.
R1-2 Expansion can be achieved in new geographic areas through direct selling, or by
establishing a formal presence in the new territory with a branch office or a separate
corporation. The new territories may also cross provincial or international boundaries.
Provincial income tax rates vary amongst the provinces. The amount of income that is
subject to tax in the new province will be different for each of the three alternatives
ICAO
mentioned above. For example, with direct selling, none of the income is taxed in the new
province, but with a separate corporation, all of the income is taxed in the new province.
Because the tax cost is different in each case, taxation is a relevant part of the decision
and must be included in any cost-benefit analysis that compares the three alternatives
_NA
[Reg. 400-402.1].
R1-3 A basic understanding of the following variables will significantly strengthen a decision
maker's ability to apply tax issues to their area of responsibility.
PNPO
Types of Income - Employment, Business, Property, Capital gains
Taxable Entities - Individuals, Corporations, Trusts
Alternative Business - Corporation, Proprietorship, Partnership, Limited
Structures partnership, Joint arrangement, Income trust
RISO
Tax Jurisdictions - Federal, Provincial, Foreign
R1-4 All cash flow decisions, whether related to revenues, expenses, asset acquisitions or
divestitures, or debt and equity restructuring, will impact the amount and timing of the tax
cost. Therefore, cash flow exists only on an after tax basis, and, the tax impacts whether
SVE
or not the ultimate result of the decision is successful. An after-tax approach to
decision-making requires each decision-maker to think "after-tax" for every decision at the
time the decision is being made, and, to consider alternative courses of action to minimize
EDU
the tax cost, in the same way that decisions are made regarding other types of costs.
Failure to apply an after-tax approach at the time that decisions are made may provide
inaccurate information for evaluation, and, result in a permanently inefficient tax structure.
?R?
Copyright © 2022 McGraw-Hill Education Ltd. 2
Instructor Solutions Manual Chapter One
