Page 1 of 255
CANADIAN INCOME TAXATION 2026:
PLANNING AND DECISION MAKING 26TH
EDITION BY WILLIAM BUCKWOLD
Question 1
Why is taxation relevant to business decision making even
though income tax is imposed after profits have been
determined?
A) Taxes are only relevant for tax return preparation, not for
operational decisions
B) Alternative courses of action may affect both the amount
and timing of future taxes, impacting after-tax cash flow
C) Tax rates are fixed and cannot be influenced by business
decisions
,Page 2 of 255
D) Only the finance department needs to consider tax
implications
Answer: B
Rationale: At all levels of management, alternative courses of
action are evaluated. In many cases, the choice between
alternatives may affect both the amount and timing of future
taxes on income generated from that activity. Including the tax
variable as part of the formal decision process leads to
improved after-tax cash flow .
Question 2
A marketing manager is choosing a strategy for establishing
sales in new geographical territories. How can the tax factor
be integral to this decision?
A) Taxes do not affect marketing decisions
B) The method of expansion (direct selling, branch office, or
separate corporation) affects provincial tax exposure and
,Page 3 of 255
overall tax cost
C) Only federal taxes matter regardless of territory
D) Marketing decisions should ignore tax implications
Answer: B
Rationale: Expansion can be achieved through direct selling,
branch office, or separate corporation. Provincial tax rates vary,
and the amount of income subject to tax in the new province
differs for each alternative. For example, with direct selling,
none of the income is taxed in the new province, but with a
separate corporation, all income is taxed there .
Question 3
What are the fundamental variables of the income tax system
that decision-makers should understand?
A) Only tax rates and filing deadlines
B) Types of income, taxable entities, alternative business
structures, and tax jurisdictions
, Page 4 of 255
C) Only corporate tax rates
D) Only personal tax credits
Answer: B
Rationale: Decision-makers should understand types of income
(employment, business, property, capital gains), taxable entities
(individuals, corporations, trusts), alternative business structures
(corporation, proprietorship, partnership, limited partnership,
joint arrangement, income trust), and tax jurisdictions (federal,
provincial, foreign) .
Question 4
What is an "after-tax" approach to decision making?
A) Considering taxes only after all decisions are finalized
B) Thinking "after-tax" for every decision at the time the
decision is being made, considering alternatives to minimize
tax cost
CANADIAN INCOME TAXATION 2026:
PLANNING AND DECISION MAKING 26TH
EDITION BY WILLIAM BUCKWOLD
Question 1
Why is taxation relevant to business decision making even
though income tax is imposed after profits have been
determined?
A) Taxes are only relevant for tax return preparation, not for
operational decisions
B) Alternative courses of action may affect both the amount
and timing of future taxes, impacting after-tax cash flow
C) Tax rates are fixed and cannot be influenced by business
decisions
,Page 2 of 255
D) Only the finance department needs to consider tax
implications
Answer: B
Rationale: At all levels of management, alternative courses of
action are evaluated. In many cases, the choice between
alternatives may affect both the amount and timing of future
taxes on income generated from that activity. Including the tax
variable as part of the formal decision process leads to
improved after-tax cash flow .
Question 2
A marketing manager is choosing a strategy for establishing
sales in new geographical territories. How can the tax factor
be integral to this decision?
A) Taxes do not affect marketing decisions
B) The method of expansion (direct selling, branch office, or
separate corporation) affects provincial tax exposure and
,Page 3 of 255
overall tax cost
C) Only federal taxes matter regardless of territory
D) Marketing decisions should ignore tax implications
Answer: B
Rationale: Expansion can be achieved through direct selling,
branch office, or separate corporation. Provincial tax rates vary,
and the amount of income subject to tax in the new province
differs for each alternative. For example, with direct selling,
none of the income is taxed in the new province, but with a
separate corporation, all income is taxed there .
Question 3
What are the fundamental variables of the income tax system
that decision-makers should understand?
A) Only tax rates and filing deadlines
B) Types of income, taxable entities, alternative business
structures, and tax jurisdictions
, Page 4 of 255
C) Only corporate tax rates
D) Only personal tax credits
Answer: B
Rationale: Decision-makers should understand types of income
(employment, business, property, capital gains), taxable entities
(individuals, corporations, trusts), alternative business structures
(corporation, proprietorship, partnership, limited partnership,
joint arrangement, income trust), and tax jurisdictions (federal,
provincial, foreign) .
Question 4
What is an "after-tax" approach to decision making?
A) Considering taxes only after all decisions are finalized
B) Thinking "after-tax" for every decision at the time the
decision is being made, considering alternatives to minimize
tax cost
