Solution Manual for Canadian Income Taxation 2024/2025 26th Edition by William Buckwold, Joan Kitunen, Matthew Roman, Abraham Iqbal

Canadian Income Taxation, 2025/2026:
ki ki ki




Planning and Decision Making ki ki ki




26th Edition ki ki




By William Buckwold ki ki




CompleteChapter Solutions Manual
ki ki ki




are included (Ch 1 to 23)
ki ki ki ki ki ki




** Immediate Download
ki ki




** Swift Response
ki ki




** All Chapters included
ki ki ki




** Excel Solutions
ki ki

, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2023-2024 Ed.
ki ki ki ki ki ki ki ki ki




CHAPTER 1 ki




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




Review Questions
ki




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



business decision making?
ki ki ki




2. Most business decisions involve the evaluation of alternative courses of action. For
ki ki ki ki ki ki ki ki ki ki ki



example, a marketing manager may be responsible for choosing a strategy for
ki ki ki ki ki ki ki ki ki ki ki ki



establishing sales in new geographical territories. Briefly explain how the tax factor can be
ki ki ki ki ki ki ki ki ki ki ki ki ki ki



an integral part of this decision.
ki ki ki ki ki ki




3. What are the fundamental variables of the income tax system that decision-makers should be
ki ki ki ki ki ki ki ki ki ki ki ki ki



familiar with so that they can apply tax issues to their areas of responsibility?
ki ki ki ki ki ki ki ki ki ki ki ki ki ki




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




. 1
Instructor Solutions Manual Chapter One
ki ki ki ki

, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2023-2024 Ed. ki ki ki ki ki ki ki ki ki




Solutions to Review Questions ki ki ki




R1-1 Once profit is determined, the Income Tax Act determines the amount of income tax that
k i ki ki ki ki ki ki ki ki ki ki ki ki ki ki



results. However, at all levels of management, alternative courses of action are evaluated.
ki ki ki ki ki ki ki ki ki ki ki ki ki



In many cases, the choice of one alternative over the other may affect both the amount and
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



the timing of future taxes on income generated from that activity. Therefore, the person
ki ki ki ki ki ki ki ki ki ki ki ki ki ki



making those decisions has a direct input into future after-tax cash flow. Obviously,
ki ki ki ki ki ki ki ki ki ki ki ki ki



decisions that reduce or postpone the payment of tax affect the ultimate return on
ki ki ki ki ki ki ki ki ki ki ki ki ki ki



investment and, in turn, the value of the enterprise. Including the tax variable as a part of
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



the formal decision process will ultimately lead to improved after-tax cash flow.
ki ki ki ki ki ki ki ki ki ki ki ki




R1-2 Expansion can be achieved in new geographic areas through direct selling, or by
ki ki ki ki ki ki ki ki ki ki ki ki ki



establishing a formal presence in the new territory with a branch office or a separate
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



corporation. The new territories may also cross provincial or international boundaries.
ki ki ki ki ki ki ki ki ki ki ki



Provincial income tax rates vary amongst the provinces. The amount of income that is
ki ki ki ki ki ki ki ki ki ki ki ki ki ki



subject to tax in the new province will be different for each of the three alternatives
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



mentioned above. For example, with direct selling, none of the income is taxed in the new
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



province, but with a separate corporation, all of the income is taxed in the new province.
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



Because the tax cost is different in each case, taxation is a relevant part of the decision and
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



must be included in any cost-benefit analysis that compares the three alternatives [Reg.
ki ki ki ki ki ki ki ki ki ki ki ki ki



400-402.1].
ki




R1-3 A basic understanding of the following variables will significantly strengthen a decision
ki ki ki ki ki ki ki ki ki ki ki ki



maker's ability to apply tax issues to their area of responsibility.
ki ki ki ki ki ki ki ki ki ki ki




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




Taxable Entities
ki ki - Individuals, Corporations, Trusts ki ki




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



Structures ki partnership, Joint arrangement, Income trust ki ki ki ki




Tax Jurisdictions ki - Federal, Provincial, Foreign ki ki




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



divestitures, or debt and equity restructuring, will impact the amount and timing of the tax
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



cost. Therefore, cash flow exists only on an after tax basis, and, the tax impacts whether or
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



not the ultimate result of the decision is successful. An after-tax approach
ki k i k i k i k i k i k i k i k i k i k i k i



to decision-making requires each decision-maker to think "after-tax" for every decision
k i k i ki ki ki ki ki ki ki ki ki



at the time the decision is being made, and, to consider alternative courses of action to
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



minimize the tax cost, in the same way that decisions are made regarding other types of
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



costs.ki




Failure to apply an after-tax approach at the time that decisions are made may
ki ki ki ki ki ki ki ki ki ki ki ki ki



provide inaccurate information for evaluation, and, result in a permanently inefficient tax
ki ki ki ki ki ki ki ki ki ki ki ki



structure.
ki




. 2
Instructor Solutions Manual Chapter One
ki ki ki ki

, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2023-2024 Ed. ki ki ki ki ki ki ki ki ki




CHAPTER 2 ki




FUNDAMENTALS OF TAX PLANNING ki ki ki




Review Questions
ki




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




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




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



Explain.
ki




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



transactions. What are the general types of tax planning activities? Briefly explain how
ki ki ki ki ki ki ki ki ki ki ki ki ki



each of them may reduce or defer the tax cost.
ki ki ki ki ki ki ki ki ki ki




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




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



the individual to transfer their business to a corporation?
ki ki ki ki ki ki ki ki ki




7. ―As long as all of the income tax rules are known, a tax plan can be developed with
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



certainty.‖ Is this statement true? Explain.
ki ki ki ki ki ki




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




9. An entrepreneur is developing a new business venture and is planning to raise equity
ki ki ki ki ki ki ki ki ki ki ki ki ki



capital from individual investors. Their adviser indicates that the venture could be
ki ki ki ki ki ki ki ki ki ki ki ki



structured as a corporation (i.e., shares are issued to the investors) or as a limited
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



partnership (i.e., partnership units are sold). Both structures provide limited liability for the
ki ki ki ki ki ki ki ki ki ki ki ki ki



investors. Should the entrepreneur consider the tax positions of the individual investors?
ki ki ki ki ki ki ki ki ki ki ki ki



Explain. Without dealing with specific tax rules, what general tax factors should an investor
ki ki ki ki ki ki ki ki ki ki ki ki ki ki



consider before making an investment?
ki ki ki ki ki




10. What is a tax avoidance transaction?ki ki ki ki ki




11. ―If a transaction (or a series of transactions) that results in a tax benefit was not undertaken
ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki ki



primarily for bona fide business, investment, or family purposes, the general anti-
ki ki ki ki ki ki ki ki ki ki ki ki



avoidance rule will apply and eliminate the tax benefit.‖ Is this statement true? Explain.
ki ki ki ki ki ki ki ki ki ki ki ki ki ki




. 1
Instructor Solutions Manual Chapter Two
ki ki ki ki