Canadian Income Taxation, 2023/2024:
12 12 12
Planningand DecisionMaking 12 12 12
26th Edition 12 12
By William Buckwold 12 12
CompleteChapterSolutions Manual
12 12 12
are included (Ch 1 to 23)
12 12 12 12 12 12
** Immediate Download
12 12
** Swift Response
12 12
** All Chapters included
12 12 12
** Excel Solutions
12 12
, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2023-2024 Ed.
12 12 12 12 12 12 12 12 12
CHAPTER 1 12
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING 12 12 12 12 12 12
Review Questions
12
1. If income tax is imposed after profits have been determined, why is taxation relevant to
12 12 12 12 12 12 12 12 12 12 12 12 12 12
business decision making?
12 12 12
2. Most business decisions involve the evaluation of alternative courses of action. For
12 12 12 12 12 12 12 12 12 12 12
example, a marketing manager may be responsible for choosing a strategy for
12 12 12 12 12 12 12 12 12 12 12 12
establishing sales in new geographical territories. Briefly explain how the tax factor can be an
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
integral part of this decision.
12 12 12 12 12
3. What are the fundamental variables of the income tax system that decision-makers should be
12 12 12 12 12 12 12 12 12 12 12 12 12
familiar with so that they can apply tax issues to their areas of responsibility?
12 12 12 12 12 12 12 12 12 12 12 12 12 12
4. What is an “after-tax” approach to decision making?
12 12 12 12 12 12 12
. 1
Instructor Solutions Manual Chapter One
12 12 12 12
, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2023-2024 Ed. 12 12 12 12 12 12 12 12 12
Solutions to Review Questions 12 12 12
R1-1 Once profit is determined, the Income Tax Act determines the amount of income tax that
1 2 12 12 12 12 12 12 12 12 12 12 12 12 12 12
results. However, at all levels of management, alternative courses of action are evaluated.
12 12 12 12 12 12 12 12 12 12 12 12 12
In many cases, the choice of one alternative over the other may affect both the amount and the
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
timing of future taxes on income generated from that activity. Therefore, the person
12 12 12 12 12 12 12 12 12 12 12 12 12
making those decisions has a direct input into future after-tax cash flow. Obviously,
12 12 12 12 12 12 12 12 12 12 12 12 12
decisions that reduce or postpone the payment of tax affect the ultimate return on
12 12 12 12 12 12 12 12 12 12 12 12 12 12
investment and, in turn, the value of the enterprise. Including the tax variable as a part of
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
the formal decision process will ultimately lead to improved after-tax cash flow.
12 12 12 12 12 12 12 12 12 12 12 12
R1-2 Expansion can be achieved in new geographic areas through direct selling, or by
12 12 12 12 12 12 12 12 12 12 12 12 12
establishing a formal presence in the new territory with a branch office or a separate
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
corporation. The new territories may also cross provincial or international boundaries.
12 12 12 12 12 12 12 12 12 12 12
Provincial income tax rates vary amongst the provinces. The amount of income that is
12 12 12 12 12 12 12 12 12 12 12 12 12 12
subject to tax in the new province will be different for each of the three alternatives
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
mentioned above. For example, with direct selling, none of the income is taxed in the new
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
province, but with a separate corporation, all of the income is taxed in the new province.
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
Because the tax cost is different in each case, taxation is a relevant part of the decision and
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
must be included in any cost-benefit analysis that compares the three alternatives [Reg.
12 12 12 12 12 12 12 12 12 12 12 12 12
400-402.1].
12
R1-3 A basic understanding of the following variables will significantly strengthen a decision
12 12 12 12 12 12 12 12 12 12 12 12
maker's ability to apply tax issues to their area of responsibility.
12 12 12 12 12 12 12 12 12 12 12
Types of Income 12 12 - Employment, Business, Property, Capital gains 12 12 12 12
12 Taxable Entities 12 - Individuals, Corporations, Trusts 12 12
Alternative Business 12 - Corporation, Proprietorship, Partnership, Limited 12 12 12
Structures 12 partnership, Joint arrangement, Income trust 12 12 12 12
Tax Jurisdictions 12 - Federal, Provincial, Foreign 12 12
R1-4 All cash flow decisions, whether related to revenues, expenses, asset acquisitions or
12 12 12 12 12 12 12 12 12 12 12 12
divestitures, or debt and equity restructuring, will impact the amount and timing of the tax
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
cost. Therefore, cash flow exists only on an after tax basis, and, the tax impacts whether or
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
not the ultimate result of the decision is successful. An after-tax approach
12 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2
to decision-making requires each decision-maker to think "after-tax" for every decision at
1 2 1 2 12 12 12 12 12 12 12 12 12 12
the time the decision is being made, and, to consider alternative courses of action to
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
minimize the tax cost, in the same way that decisions are made regarding other types of
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
costs.12
Failure to apply an after-tax approach at the time that decisions are made may
1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2
provide inaccurate information for evaluation, and, result in a permanently inefficient tax
1 2 12 12 12 12 12 12 12 12 12 12 12
structure.
12
. 2
Instructor Solutions Manual Chapter One
12 12 12 12
, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2023-2024 Ed. 12 12 12 12 12 12 12 12 12
CHAPTER 2 12
FUNDAMENTALS OF TAX PLANNING 12 12 12
Review Questions
12
1. “Tax planning and tax avoidance mean the same thing.” Is this statement true? Explain.
12 12 12 12 12 12 12 12 12 12 12 12 12
2. What distinguishes tax evasion from tax avoidance and tax planning?
12 12 12 12 12 12 12 12 12
3. Does Canada Revenue Agency deal with all tax avoidance activities in the same way?
12 12 12 12 12 12 12 12 12 12 12 12 12
Explain.
12
4. The purpose of tax planning is to reduce or defer the tax costs associated with financial
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
transactions. What are the general types of tax planning activities? Briefly explain how
12 12 12 12 12 12 12 12 12 12 12 12 12
each of them may reduce or defer the tax cost.
12 12 12 12 12 12 12 12 12 12
5. “It is always better to pay tax later rather than sooner.” Is this statement true? Explain.
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
6. When corporate tax rates are 13% and tax rates for individuals are 40%, is it always better for
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
the individual to transfer their business to a corporation?
12 12 12 12 12 12 12 12 12
7. “As long as all of the income tax rules are known, a tax plan can be developed with
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
certainty.” Is this statement true? Explain.
12 12 12 12 12 12
8. What basic skills are required to develop a good tax plan?
12 12 12 12 12 12 12 12 12 12
9. An entrepreneur is developing a new business venture and is planning to raise equity
12 12 12 12 12 12 12 12 12 12 12 12 12
capital from individual investors. Their adviser indicates that the venture could be
12 12 12 12 12 12 12 12 12 12 12 12
structured as a corporation (i.e., shares are issued to the investors) or as a limited
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
partnership (i.e., partnership units are sold). Both structures provide limited liability for the
12 12 12 12 12 12 12 12 12 12 12 12 12
investors. Should the entrepreneur consider the tax positions of the individual investors?
12 12 12 12 12 12 12 12 12 12 12 12
Explain. Without dealing with specific tax rules, what general tax factors should an investor
12 12 12 12 12 12 12 12 12 12 12 12 12 12
consider before making an investment?
12 12 12 12 12
10. What is a tax avoidance transaction?
12 12 12 12 12
11. “If a transaction (or a series of transactions) that results in a tax benefit was not undertaken
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
primarily for bona fide business, investment, or family purposes, the general anti-
12 12 12 12 12 12 12 12 12 12 12 12
avoidance rule will apply and eliminate the tax benefit.” Is this statement true? Explain.
12 12 12 12 12 12 12 12 12 12 12 12 12 12
. 1
Instructor Solutions Manual Chapter Two
12 12 12 12
12 12 12
Planningand DecisionMaking 12 12 12
26th Edition 12 12
By William Buckwold 12 12
CompleteChapterSolutions Manual
12 12 12
are included (Ch 1 to 23)
12 12 12 12 12 12
** Immediate Download
12 12
** Swift Response
12 12
** All Chapters included
12 12 12
** Excel Solutions
12 12
, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2023-2024 Ed.
12 12 12 12 12 12 12 12 12
CHAPTER 1 12
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING 12 12 12 12 12 12
Review Questions
12
1. If income tax is imposed after profits have been determined, why is taxation relevant to
12 12 12 12 12 12 12 12 12 12 12 12 12 12
business decision making?
12 12 12
2. Most business decisions involve the evaluation of alternative courses of action. For
12 12 12 12 12 12 12 12 12 12 12
example, a marketing manager may be responsible for choosing a strategy for
12 12 12 12 12 12 12 12 12 12 12 12
establishing sales in new geographical territories. Briefly explain how the tax factor can be an
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
integral part of this decision.
12 12 12 12 12
3. What are the fundamental variables of the income tax system that decision-makers should be
12 12 12 12 12 12 12 12 12 12 12 12 12
familiar with so that they can apply tax issues to their areas of responsibility?
12 12 12 12 12 12 12 12 12 12 12 12 12 12
4. What is an “after-tax” approach to decision making?
12 12 12 12 12 12 12
. 1
Instructor Solutions Manual Chapter One
12 12 12 12
, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2023-2024 Ed. 12 12 12 12 12 12 12 12 12
Solutions to Review Questions 12 12 12
R1-1 Once profit is determined, the Income Tax Act determines the amount of income tax that
1 2 12 12 12 12 12 12 12 12 12 12 12 12 12 12
results. However, at all levels of management, alternative courses of action are evaluated.
12 12 12 12 12 12 12 12 12 12 12 12 12
In many cases, the choice of one alternative over the other may affect both the amount and the
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
timing of future taxes on income generated from that activity. Therefore, the person
12 12 12 12 12 12 12 12 12 12 12 12 12
making those decisions has a direct input into future after-tax cash flow. Obviously,
12 12 12 12 12 12 12 12 12 12 12 12 12
decisions that reduce or postpone the payment of tax affect the ultimate return on
12 12 12 12 12 12 12 12 12 12 12 12 12 12
investment and, in turn, the value of the enterprise. Including the tax variable as a part of
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
the formal decision process will ultimately lead to improved after-tax cash flow.
12 12 12 12 12 12 12 12 12 12 12 12
R1-2 Expansion can be achieved in new geographic areas through direct selling, or by
12 12 12 12 12 12 12 12 12 12 12 12 12
establishing a formal presence in the new territory with a branch office or a separate
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
corporation. The new territories may also cross provincial or international boundaries.
12 12 12 12 12 12 12 12 12 12 12
Provincial income tax rates vary amongst the provinces. The amount of income that is
12 12 12 12 12 12 12 12 12 12 12 12 12 12
subject to tax in the new province will be different for each of the three alternatives
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
mentioned above. For example, with direct selling, none of the income is taxed in the new
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
province, but with a separate corporation, all of the income is taxed in the new province.
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
Because the tax cost is different in each case, taxation is a relevant part of the decision and
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
must be included in any cost-benefit analysis that compares the three alternatives [Reg.
12 12 12 12 12 12 12 12 12 12 12 12 12
400-402.1].
12
R1-3 A basic understanding of the following variables will significantly strengthen a decision
12 12 12 12 12 12 12 12 12 12 12 12
maker's ability to apply tax issues to their area of responsibility.
12 12 12 12 12 12 12 12 12 12 12
Types of Income 12 12 - Employment, Business, Property, Capital gains 12 12 12 12
12 Taxable Entities 12 - Individuals, Corporations, Trusts 12 12
Alternative Business 12 - Corporation, Proprietorship, Partnership, Limited 12 12 12
Structures 12 partnership, Joint arrangement, Income trust 12 12 12 12
Tax Jurisdictions 12 - Federal, Provincial, Foreign 12 12
R1-4 All cash flow decisions, whether related to revenues, expenses, asset acquisitions or
12 12 12 12 12 12 12 12 12 12 12 12
divestitures, or debt and equity restructuring, will impact the amount and timing of the tax
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
cost. Therefore, cash flow exists only on an after tax basis, and, the tax impacts whether or
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
not the ultimate result of the decision is successful. An after-tax approach
12 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2
to decision-making requires each decision-maker to think "after-tax" for every decision at
1 2 1 2 12 12 12 12 12 12 12 12 12 12
the time the decision is being made, and, to consider alternative courses of action to
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
minimize the tax cost, in the same way that decisions are made regarding other types of
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
costs.12
Failure to apply an after-tax approach at the time that decisions are made may
1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2
provide inaccurate information for evaluation, and, result in a permanently inefficient tax
1 2 12 12 12 12 12 12 12 12 12 12 12
structure.
12
. 2
Instructor Solutions Manual Chapter One
12 12 12 12
, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2023-2024 Ed. 12 12 12 12 12 12 12 12 12
CHAPTER 2 12
FUNDAMENTALS OF TAX PLANNING 12 12 12
Review Questions
12
1. “Tax planning and tax avoidance mean the same thing.” Is this statement true? Explain.
12 12 12 12 12 12 12 12 12 12 12 12 12
2. What distinguishes tax evasion from tax avoidance and tax planning?
12 12 12 12 12 12 12 12 12
3. Does Canada Revenue Agency deal with all tax avoidance activities in the same way?
12 12 12 12 12 12 12 12 12 12 12 12 12
Explain.
12
4. The purpose of tax planning is to reduce or defer the tax costs associated with financial
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
transactions. What are the general types of tax planning activities? Briefly explain how
12 12 12 12 12 12 12 12 12 12 12 12 12
each of them may reduce or defer the tax cost.
12 12 12 12 12 12 12 12 12 12
5. “It is always better to pay tax later rather than sooner.” Is this statement true? Explain.
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
6. When corporate tax rates are 13% and tax rates for individuals are 40%, is it always better for
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
the individual to transfer their business to a corporation?
12 12 12 12 12 12 12 12 12
7. “As long as all of the income tax rules are known, a tax plan can be developed with
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
certainty.” Is this statement true? Explain.
12 12 12 12 12 12
8. What basic skills are required to develop a good tax plan?
12 12 12 12 12 12 12 12 12 12
9. An entrepreneur is developing a new business venture and is planning to raise equity
12 12 12 12 12 12 12 12 12 12 12 12 12
capital from individual investors. Their adviser indicates that the venture could be
12 12 12 12 12 12 12 12 12 12 12 12
structured as a corporation (i.e., shares are issued to the investors) or as a limited
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
partnership (i.e., partnership units are sold). Both structures provide limited liability for the
12 12 12 12 12 12 12 12 12 12 12 12 12
investors. Should the entrepreneur consider the tax positions of the individual investors?
12 12 12 12 12 12 12 12 12 12 12 12
Explain. Without dealing with specific tax rules, what general tax factors should an investor
12 12 12 12 12 12 12 12 12 12 12 12 12 12
consider before making an investment?
12 12 12 12 12
10. What is a tax avoidance transaction?
12 12 12 12 12
11. “If a transaction (or a series of transactions) that results in a tax benefit was not undertaken
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12
primarily for bona fide business, investment, or family purposes, the general anti-
12 12 12 12 12 12 12 12 12 12 12 12
avoidance rule will apply and eliminate the tax benefit.” Is this statement true? Explain.
12 12 12 12 12 12 12 12 12 12 12 12 12 12
. 1
Instructor Solutions Manual Chapter Two
12 12 12 12
