SOLUTION MANUAL Canadian Income Taxation 26th Edition by William Buckwold, All Chapters (1 - 23) / Complete Guide A+

SOLUTION MANUAL
Canadian Income Taxation 26th Edition
by William Buckwold, All Chapters 1 - 23

,TABLE OF CONTENTS ht ht




Chapter1 Taxation-Its Role in Decision Making
ht ht ht ht ht




Chapter2 Fundamentals of Tax Planning
ht ht ht ht




Chapter 3 Liability for Tax, Income Determination, and Administration of the Income Tax System
ht ht ht ht ht ht ht ht ht ht ht ht ht




Chapter 4 Income from Employment
ht ht ht ht




Chapter 5 Income from Business
ht ht ht ht




Chapter 6 The Acquisition, Use, and Disposal of Depreciable Property
ht ht ht ht ht ht ht ht ht




Chapter7 Income from Property
ht ht ht




Chapter8 Gains and Losses on the Disposition of Capital Property-Capital Gains
ht ht ht ht ht ht ht ht ht ht




Chapter 9 Other Income, Other Deductions, and Special Rules for Completing Net Income for Tax Purposes
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht




Chapter 10 Individuals: Determination of Taxable Income and Taxes Payable
ht ht ht ht ht ht ht ht ht




Chapter 11 Corporations-An Introduction
ht ht ht




Chapter 12 Organization, Capital Structures, and Income Distributions of Corporations
ht ht ht ht ht ht ht ht ht




Chapter 13 The Canadian-Controlled Private Corporation
ht ht ht ht ht




Chapter 14 Multiple Corporations and Their Reorganization
ht ht ht ht ht ht




Chapter 15 Partnerships
ht ht




Chapter 16 Limited Partnerships and Joint Ventures
ht ht ht ht ht ht




Chapter 17 Trusts
ht ht




Chapter 18 Business Acquisitions and Divestitures-Assets versus Shares
ht ht ht ht ht ht ht




Chapter 19 Business Acquisitions and Divestitures-Tax-Deferred Sales
ht ht ht ht ht ht




Chapter 20 Domestic and International Business Expansion
ht ht ht ht ht ht




Chapter 21 Tax Aspects of Corporate Financing
ht ht ht ht ht ht




Chapter 22 Introduction to GST/HST
ht ht ht ht




Chapter 23 Business Valuations
ht ht ht

, CHAPTER 1 ht




TAXATION― ITS ROLE IN BUSINESS DECISION MAKING ht ht ht ht ht ht




Review Questions ht




1. If income tax is imposed after profits have been determined, why is taxation relevant to business de
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



cision making? ht




2. Most business decisions involve the evaluation of alternative courses of action. For example, a mar
ht ht ht ht ht ht ht ht ht ht ht ht ht ht



keting manager may be responsible for choosing a strategy for establishing sales in new geographi
ht ht ht ht ht ht ht ht ht ht ht ht ht ht



cal territories. Briefly explain how the tax factor can be an integral part of this decision.
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht




3. What are the fundamental variables of the income tax system that decision-
ht ht ht ht ht ht ht ht ht ht ht



makers should be familiar with so that they can apply tax issues to their areas of responsibility?
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht




4. What is an ―after-tax‖ approach to decision making?
ht ht ht ht ht ht ht




Solutions to Review Questions
ht ht ht




R1-
1 Once profit is determined, the Income Tax Act determines the amount of income tax that results. H
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



owever, at all levels of management, alternative courses of action are evaluated.In many cases, the c
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



hoice of one alternative over the other may affect both the amount and the timing of future taxes on i
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



ncome generated from that activity. Therefore, the person making those decisions has a direct input i
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



nto future after-
ht ht



tax cash flow. Obviously, decisions that reduce or postpone the payment of tax affect the ultimate r
ht h t ht ht ht ht ht ht ht ht ht ht ht ht ht ht



eturn on investment and, in turn, the value of the enterprise. Including the tax variable as a part of th
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



e formal decision process will ultimately lead to improved after-tax cash flow.
ht ht ht ht ht ht ht ht ht ht ht




R1-
2 Expansion can be achieved in new geographic areas through direct selling, or by establishing a for
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



mal presence in the new territory with a branch office or a separate corporation. The new territories
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



may also cross provincial or international boundaries. Provincial income tax rates vary amongst the
ht ht ht ht ht ht ht ht ht ht ht ht ht ht



provinces. The amount of income that is subject to tax in the new province will be different for each
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



of the three alternatives mentioned above. For example, with direct selling, none of the income is tax
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



ed in the new province, but with a separate corporation, all of the income is taxed in the new provinc
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



e. Because the tax cost is different in each case, taxation is a relevant part of the decision and must b
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



e included in any cost-benefit analysis that compares the three alternatives [Reg. 400-402.1].
ht ht ht ht ht ht ht ht ht ht ht ht




R1-
3 A basic understanding of the following variables will significantly strengthen a decision maker's a
ht ht ht ht ht ht ht ht ht ht ht ht ht ht



bility to apply tax issues to their area of responsibility.
ht ht ht ht ht ht ht ht ht




Types of Income ht ht - Employment, Business, Property, Capital gains ht ht ht ht




Taxable Entities ht - Individuals, Corporations, Trusts ht ht




Alternative Business ht - Corporation, Proprietorship, Partnership, Limited ht ht ht

, Structures partnership, Joint arrangement, Income trust ht ht ht ht




Tax Jurisdictions ht - Federal, Provincial, Foreign ht ht




R1-
4 All cash flow decisions, whether related to revenues, expenses, asset acquisitions or divestitures, o
ht ht ht ht ht ht ht ht ht ht ht ht ht ht



r debt and equity restructuring, will impact the amount and timing of the tax cost. Therefore, cash fl
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



ow exists only on an after tax basis, and, the tax impacts whetheror not the ultimate result of the d
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



ecision is successful. An after-tax approach to decision-making requires each decision-
ht ht ht ht ht ht ht ht ht ht



maker to think "after- ht ht ht



tax" for every decision at thetime the decision is being made, and, to consider alternative courses of
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



action to minimizethe tax cost, in the same way that decisions are made regarding other types of cost
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



s.

Failure to apply an after- h t h t h t h t



tax approach at the time that decisions are made may provideinaccurate information for evaluation, and,
h t h t h t h t h t h t h t h t h t h t ht ht ht ht ht ht



result in a permanently inefficient tax structure.
ht ht ht ht ht ht




CHAPTER 2 ht




FUNDAMENTALS OF TAX PLANNING ht ht ht




Review Questions ht




1. ―Tax planning and tax avoidance mean the same thing.‖ Is this statement true? Explain.
ht ht ht ht ht ht ht ht ht ht ht ht ht




2. What distinguishes tax evasion from tax avoidance and tax planning?
ht ht ht ht ht ht ht ht ht




3. Does Canada Revenue Agency deal with all tax avoidance activities in the same way? Explain.
ht ht ht ht ht ht ht ht ht ht ht ht ht ht




4. The purpose of tax planning is to reduce or defer the tax costs associated with financial transactions
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



. What are the general types of tax planning activities? Briefly explain how each of them may redu
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



ce or defer the tax cost.
ht ht ht ht ht




5. ―It is always better to pay tax later rather than sooner.‖ Is this statement true? Explain.
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht




6. When corporate tax rates are 13% and tax rates for individuals are 40%, is it always better for the i
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



ndividual to transfer their business to a corporation? ht ht ht ht ht ht ht




7. ―As long as all of the income tax rules are known, a tax plan can be developed with certainty.‖ Is t
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



his statement true? Explain.
ht ht ht




8. What basic skills are required to develop a good tax plan?
ht ht ht ht ht ht ht ht ht ht



9. An entrepreneur is developing a new business venture and is planning to raise equity capital from i
ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht ht



ndividual investors. Their adviser indicates that the venture could be structured as a corporation (i.
ht ht ht ht ht ht ht ht ht ht ht ht ht ht



e., shares are issued to the investors) or as a limited partnership (i.e., partnership units are sold).
ht ht ht ht ht ht ht ht ht ht ht h t h t h t h t h t h



Both structures provide limited liability forthe investors. Should the entrepreneur consider the t
t h t h t h t h t h t ht ht ht ht ht ht ht ht



ax positions of the individual investors? Explain. Without dealing with specific tax rules, what gen
ht ht ht ht ht ht ht ht ht ht ht ht ht ht