A A A A A A
26th AA A
Edition by William Buckwold
A A A A
All chapters 1-23 Covered
A A A
,
,TABLE OF CONTENT
A A
ChapterA1ATaxationAItsARoleAinADecisionAMakingA Chap
terA2AFundamentalsAofATaxAPlanning
ChapterA3ALiabilityAforATax,AIncomeADetermination,AandAAdministrationAofAtheAIncomeATaxASystemA Cha
pterA4AIncomeAfromAEmployment
ChapterA5AIncomeAfromABusiness
ChapterA6ATheAAcquisition,AUse,AandADisposalAofADepreciableAPropertyA Cha
pterA7AIncomeAfromAProperty
ChapterA8AGainsAandALossesAonAtheADispositionAofACapitalAProperty-CapitalAGains
ChapterA9AOtherAIncome,AOtherADeductions,AandASpecialARulesAforACompletingANetAIncomeAforATaxAPurposes
A ChapterA10AIndividuals:ADeterminationAofATaxableAIncomeAandATaxesAPayable
ChapterA11ACorporations-AnAIntroduction
ChapterA12AOrganization,ACapitalAStructures,AandAIncomeADistributionsAofACorporationsA Cha
pterA13ATheACanadian-ControlledAPrivateACorporation
ChapterA14AMultipleACorporationsAandATheirAReorganizationA Chap
terA15APartnerships
ChapterA16ALimitedAPartnershipsAandAJointAVenturesA
ChapterA17ATrusts
ChapterA18ABusinessAAcquisitionsAandADivestitures-
AssetsAversusASharesA ChapterA19ABusinessAAcquisitionsAandADivestitures-
Tax-
DeferredASalesA ChapterA20ADomesticAandAInternationalABusinessAExpansion
ChapterA21ATaxAAspectsAofACorporateAFinancingA Chap
terA22AIntroductionAtoAGST/HST
ChapterA23ABusinessAValuations
Chapter 1 A
Taxation – It’s Role in Business Decision Making
A A A A A A A
ReviewAQuestions
1. IfA incomeA taxA isA imposedA afterA profitsA haveA beenA determined,A whyA isA taxationA relevantA t
oA businessAdecisionAmaking?
2. MostAbusinessAdecisionsAinvolveAtheAevaluationAofAalternativeAcoursesAofAaction.AForAexampl
e,A aA marketingA managerA mayA beA responsibleA forA choosingA aA strategyA forA establishingA sale
sA inA newAgeographicalAterritories.ABrieflyAexplainAhowAtheAtaxAfactorAcanAbeAanAintegralApartA
ofAthisA decision.
3. WhatAareAtheAfundamentalAvariablesAofAtheAincomeAtaxAsystemAthatAdecision-
makersAshouldA beA familiarAwithAsoAthatAtheyAcanAapplyAtaxAissuesAtoAtheirAareasAofAresponsi
bility?
4. WhatAisAanA“after-tax”AapproachAtoAdecisionAmaking?
, SolutionsAtoAReviewAQuestions
R1-
1A OnceA profitA isA determined,A theA IncomeA TaxA ActA determinesA theA amountA ofA incomeA taxA
thatA results.AHowever,A atA allA levelsA ofA management,A alternativeA coursesA ofA actionA areA evalua
ted.A InA manyA cases,A theAchoiceA ofA oneA alternativeA overA theA otherA mayA affectA bothA theAamoun
tA andA theA timingA ofA futureA taxesA onA incomeA generatedA fromA thatA activity.A Therefore,A theA per
sonA makingA thoseA decisionsA hasA aA directA inputA intoA futureA after-
taxA cashA flow.A Obviously,A decisionsA thatA reduceAorA postponeA theA paymentA ofAtaxA affectA theA
ultimateA returnA onA investmentA and,A inAturn,A theAvalueA ofAtheAenterprise.AIncludingAtheAtaxAva
riableAasA aApartA ofAtheAformalA decisionAprocessA willAultimatelyAleadAtoAimprovedAafter-
taxAcashAflow.
R1-
2AExpansionAcanAbeAachievedA inAnewAgeographicAareasAthroughAdirectAselling,AorAbyAestablishi
ngAaA formalApresenceAinAtheA newA territoryAwithAaAbranchA officeAorA aAseparateAcorporation.AT
heAnewA territoriesA mayA alsoAcrossA provincialA orA internationalA boundaries.A ProvincialAincome
A taxA ratesA varyA amongstA theA provinces.A TheA amountA ofA incomeA thatA isAsubjectA toA taxA inAtheA n
ewA provinceA willA beA differentAforA eachAofAtheAthreeA alternativesA mentionedA above.A ForA exam
ple,A withA directA selling,A noneA ofA theA incomeA isA taxedA inA theA newA province,A butA withA aA separ
ateA corporation,A allA ofA theA incomeA isA taxedA inA theA newA province.A BecauseA theA taxA costA isA
differentA inA eachA case,A taxationA isA aA relevantA partA ofA theA decisionA andA mustA beA includedA inA
anyA cost-benefitA analysisA thatAcomparesAtheAthreeAalternativesA[Reg.A400-402.1].
R1-
3AAA basicAunderstandingA ofA theAfollowingA variablesA willAsignificantlyA strengthenA aAdecisionA
maker'sAabilityAtoAapplyAtaxAissuesAtoAtheirAareaAofAresponsibility.
TypesAofAIncome -
Employment,ABusiness,AProperty,ACapitalAgainsA T
axableAEntities - Individuals,ACorporations,ATrusts
AlternativeABusiness -
Corporation,AProprietorship,APartnership,ALimitedA St
ructures partnership,AJointAarrangement,AIncomeAtrust
TaxAJurisdictions - Federal,AProvincial,AForeign
R1-
4A AllA cashA flowA decisions,A whetherA relatedA toA revenues,A expenses,A assetA acquisitionsA orA d
ivestitures,A orA debtA andA equityA restructuring,A willA impactA theA amountA andA timingA ofA theA tax
A cost.ATherefore,AcashAflowAexistsAonlyAonAanAafterAtaxAbasis,Aand,AtheAtaxAimpactsAwhetherAorA
notA theA ultimateA resultAofA theA decisionA isA successful.A AnA after-taxA approachA toAA decision-
A makingA requiresA eachA decision-makerA toA thinkA "after-
tax"A forA everyA decisionA atA theA timeA theA decisionAisAbeingAmade,Aand,AtoAconsiderAalternativeA
coursesAofAactionAtoAminimizeAtheAtaxAcost,A inAtheAsameAwayAthatAdecisionsAareAmadeAregardi
ngAotherAtypesAofAcosts.
FailureA toA applyA anA after-
taxA approachA atA theA timeA thatA decisionsA areA madeA mayA provideA inaccurateAinformationAf
orAevaluation,Aand,AresultAinAaApermanentlyAinefficientAtaxAstructure.