TESTBANK j
j
CanadianIncomeTaxation 20222023 25th
j j j j
Canadian Edition Buckwold
j j j
, Stuvia.comj-jThejMarketplacejtojBuyjandjSelljyourjStudyj MaterialStuvia.comj-
jThejMarketplacejtojBuyjandjSelljyourjStudyjMaterial
Medconnoisseurlibraries.com
CHAPTER 1 j
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
j j j j j j
ReviewjQuestions
1. Ifjincomejtaxjisjimposedjafterjprofitsjhavejbeenjdetermined,jwhyjisjtaxationjrelevantjtojbusines
sjdecisionjmaking?
2. Mostjbusinessjdecisionsjinvolvejthejevaluationjofjalternativejcoursesjofjaction.jForjexample,ja
jmarketingjmanagerjmayjbejresponsiblejforjchoosingjajstrategyj forj establishingj salesj inj new
j geographicalj territories.j Brieflyj explainj howj thej taxj factorj canjbejanjintegraljpartjofjthisjdeci
sion.
3. Whatj arej thej fundamentalj variablesj ofj thej incomej taxj systemj thatj decision-
makersjshouldjbejfamiliarjwithjsojthatjtheyjcanjapplyjtaxjissuesjtojtheirjareasjofjresponsibility?
4. Whatjisjanj―after-tax‖japproachjtojdecisionjmaking?
1
Downloadedjby:jdestine465j|
Pagej1jofj987
Wantjtojearnj$1.236
Distributionjofjthisjdocumentjisjillegal extrajperjyear?
, Stuvia.comj-jThejMarketplacejtojBuyjandjSelljyourjStudyj MaterialStuvia.comj-
jThejMarketplacejtojBuyjandjSelljyourjStudyjMaterial
Medconnoisseurlibraries.com
SolutionsjtojReviewjQuestions
R1-
1jOncejprofitjisjdetermined,jthejIncomejTaxjActjdeterminesjthejamountjofjincomejtaxjthatjresult
s.jHowever,jatjalljlevelsjofjmanagement,jalternativejcoursesjofjactionjarejevaluated.j Inj manyj c
ases,j thej choicej ofj onej alternativej overj thej otherj mayj affectj bothj thej amountjandj thej timin
gj ofj futurej taxesj onj incomej generatedj fromj thatj activity.j Therefore,j thejpersonj makingj thos
ej decisionsj hasj aj directj inputj intoj futurej after-
taxj cashj flow.jObviously,jdecisionsjthatjreducejorjpostponejthejpaymentjofjtaxjaffectjthejultima
tejreturnj onj investmentj and,j inj turn,j thej valuej ofj thej enterprise.j Includingj thej taxj variablej asj aj
partjofjthejformaljdecisionjprocessjwilljultimatelyjleadjtojimprovedjafter-taxjcashjflow.
R1-
2jExpansionjcanjbejachievedjinjnewjgeographicjareasjthroughjdirectjselling,jorjbyj establishingj
ajformaljpresencejinjthejnewjterritoryjwithjajbranchjofficejorjajseparatejcorporation.jThejnewjterr
itoriesjmayjalsojcrossjprovincialjorjinternationaljboundaries.jProvincialjincomejtaxjratesjvaryja
mongstjthejprovinces.jThejamountjofjincomejthatjisjsubjectjtojtaxjinjthejnewjprovincejwilljbejdiff
erentjforjeachjofjthejthreejalternativesjmentionedjabove.jForjexample,jwithjdirectjselling,jnonejo
fjthejincomejisjtaxedjinjthejnewjprovince,jbutjwithjajseparatejcorporation,jalljofjthejincomejisjtaxe
djinjthejnewjprovince.jBecausej thej taxj costj isj differentj inj eachj case,j taxationj isj ajrelevantj par
tj ofj thej decisionjandjmustjbejincludedjinjanyjcost-
benefitjanalysisjthatjcomparesjthej threejalternativesj [Reg.j400-402.1].
R1-
3jAjbasicjunderstandingjofjthejfollowingjvariablesjwilljsignificantlyjstrengthenjajdecisionjmaker'
sjabilityjtojapplyjtaxjissuesjtojtheirjareajofjresponsibility.
TypesjofjIncome -
Employment,jBusiness,jProperty,jCapitaljgainsjTax
ablejEntities - Individuals,jCorporations,jTrusts
AlternativejBusiness - Corporation,jProprietorship,jPartnership,jLimited
Structures
partnership,jJointjarrangement,jIncomejtrustjTaxjJ
urisdictions -j Federal,jProvincial,jForeign
R1-
4jAlljcashjflowjdecisions,jwhetherjrelatedjtojrevenues,jexpenses,jassetjacquisitionsjorjdivestitu
res,jorjdebtjandjequityjrestructuring,jwilljimpactjthejamountjandjtimingjofjthejtaxjcost.j Therefore
,j cashj flowj existsj onlyj onj anj afterj taxj basis,j and,j thej taxj impactsj whetherjorjnotjthejultimatejre
sultjofjthejdecisionjisjsuccessful.jAnjafter-taxjapproachjtojdecision-
jmakingjrequiresjeachjdecision-makerjtojthinkj"after-
tax"jforjeveryjdecisionjatjthejtimejthejdecisionjisjbeingjmade,jand,jtojconsiderjalternativejcourse
sjofjactionjtojminimizejthejtaxjcost,jinjthejsamejwayjthatjdecisionsjarejmadejregardingjotherjtype
sjofjcosts.
Failurejtojapplyjanjafter-
taxjapproachjatjthejtimejthatj decisionsjarejmadejmayjprovidej inaccuratejinformationjforjeval
uation,jand,jresultjinjajpermanentlyjinefficientjtaxjstructure.
Downloadedjby:jdestine465j|
Pagej2jofj987
Wantjtojearnj$1.236
Distributionjofjthisjdocumentjisjillegal extrajperjyear?
, Stuvia.comj-jThejMarketplacejtojBuyjandjSelljyourjStudyj MaterialStuvia.comj-
jThejMarketplacejtojBuyjandjSelljyourjStudyjMaterial
Medconnoisseurlibraries.com
2
Downloadedjby:jdestine465j|
Pagej3jofj987
Wantjtojearnj$1.236
Distributionjofjthisjdocumentjisjillegal extrajperjyear?
j
CanadianIncomeTaxation 20222023 25th
j j j j
Canadian Edition Buckwold
j j j
, Stuvia.comj-jThejMarketplacejtojBuyjandjSelljyourjStudyj MaterialStuvia.comj-
jThejMarketplacejtojBuyjandjSelljyourjStudyjMaterial
Medconnoisseurlibraries.com
CHAPTER 1 j
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
j j j j j j
ReviewjQuestions
1. Ifjincomejtaxjisjimposedjafterjprofitsjhavejbeenjdetermined,jwhyjisjtaxationjrelevantjtojbusines
sjdecisionjmaking?
2. Mostjbusinessjdecisionsjinvolvejthejevaluationjofjalternativejcoursesjofjaction.jForjexample,ja
jmarketingjmanagerjmayjbejresponsiblejforjchoosingjajstrategyj forj establishingj salesj inj new
j geographicalj territories.j Brieflyj explainj howj thej taxj factorj canjbejanjintegraljpartjofjthisjdeci
sion.
3. Whatj arej thej fundamentalj variablesj ofj thej incomej taxj systemj thatj decision-
makersjshouldjbejfamiliarjwithjsojthatjtheyjcanjapplyjtaxjissuesjtojtheirjareasjofjresponsibility?
4. Whatjisjanj―after-tax‖japproachjtojdecisionjmaking?
1
Downloadedjby:jdestine465j|
Pagej1jofj987
Wantjtojearnj$1.236
Distributionjofjthisjdocumentjisjillegal extrajperjyear?
, Stuvia.comj-jThejMarketplacejtojBuyjandjSelljyourjStudyj MaterialStuvia.comj-
jThejMarketplacejtojBuyjandjSelljyourjStudyjMaterial
Medconnoisseurlibraries.com
SolutionsjtojReviewjQuestions
R1-
1jOncejprofitjisjdetermined,jthejIncomejTaxjActjdeterminesjthejamountjofjincomejtaxjthatjresult
s.jHowever,jatjalljlevelsjofjmanagement,jalternativejcoursesjofjactionjarejevaluated.j Inj manyj c
ases,j thej choicej ofj onej alternativej overj thej otherj mayj affectj bothj thej amountjandj thej timin
gj ofj futurej taxesj onj incomej generatedj fromj thatj activity.j Therefore,j thejpersonj makingj thos
ej decisionsj hasj aj directj inputj intoj futurej after-
taxj cashj flow.jObviously,jdecisionsjthatjreducejorjpostponejthejpaymentjofjtaxjaffectjthejultima
tejreturnj onj investmentj and,j inj turn,j thej valuej ofj thej enterprise.j Includingj thej taxj variablej asj aj
partjofjthejformaljdecisionjprocessjwilljultimatelyjleadjtojimprovedjafter-taxjcashjflow.
R1-
2jExpansionjcanjbejachievedjinjnewjgeographicjareasjthroughjdirectjselling,jorjbyj establishingj
ajformaljpresencejinjthejnewjterritoryjwithjajbranchjofficejorjajseparatejcorporation.jThejnewjterr
itoriesjmayjalsojcrossjprovincialjorjinternationaljboundaries.jProvincialjincomejtaxjratesjvaryja
mongstjthejprovinces.jThejamountjofjincomejthatjisjsubjectjtojtaxjinjthejnewjprovincejwilljbejdiff
erentjforjeachjofjthejthreejalternativesjmentionedjabove.jForjexample,jwithjdirectjselling,jnonejo
fjthejincomejisjtaxedjinjthejnewjprovince,jbutjwithjajseparatejcorporation,jalljofjthejincomejisjtaxe
djinjthejnewjprovince.jBecausej thej taxj costj isj differentj inj eachj case,j taxationj isj ajrelevantj par
tj ofj thej decisionjandjmustjbejincludedjinjanyjcost-
benefitjanalysisjthatjcomparesjthej threejalternativesj [Reg.j400-402.1].
R1-
3jAjbasicjunderstandingjofjthejfollowingjvariablesjwilljsignificantlyjstrengthenjajdecisionjmaker'
sjabilityjtojapplyjtaxjissuesjtojtheirjareajofjresponsibility.
TypesjofjIncome -
Employment,jBusiness,jProperty,jCapitaljgainsjTax
ablejEntities - Individuals,jCorporations,jTrusts
AlternativejBusiness - Corporation,jProprietorship,jPartnership,jLimited
Structures
partnership,jJointjarrangement,jIncomejtrustjTaxjJ
urisdictions -j Federal,jProvincial,jForeign
R1-
4jAlljcashjflowjdecisions,jwhetherjrelatedjtojrevenues,jexpenses,jassetjacquisitionsjorjdivestitu
res,jorjdebtjandjequityjrestructuring,jwilljimpactjthejamountjandjtimingjofjthejtaxjcost.j Therefore
,j cashj flowj existsj onlyj onj anj afterj taxj basis,j and,j thej taxj impactsj whetherjorjnotjthejultimatejre
sultjofjthejdecisionjisjsuccessful.jAnjafter-taxjapproachjtojdecision-
jmakingjrequiresjeachjdecision-makerjtojthinkj"after-
tax"jforjeveryjdecisionjatjthejtimejthejdecisionjisjbeingjmade,jand,jtojconsiderjalternativejcourse
sjofjactionjtojminimizejthejtaxjcost,jinjthejsamejwayjthatjdecisionsjarejmadejregardingjotherjtype
sjofjcosts.
Failurejtojapplyjanjafter-
taxjapproachjatjthejtimejthatj decisionsjarejmadejmayjprovidej inaccuratejinformationjforjeval
uation,jand,jresultjinjajpermanentlyjinefficientjtaxjstructure.
Downloadedjby:jdestine465j|
Pagej2jofj987
Wantjtojearnj$1.236
Distributionjofjthisjdocumentjisjillegal extrajperjyear?
, Stuvia.comj-jThejMarketplacejtojBuyjandjSelljyourjStudyj MaterialStuvia.comj-
jThejMarketplacejtojBuyjandjSelljyourjStudyjMaterial
Medconnoisseurlibraries.com
2
Downloadedjby:jdestine465j|
Pagej3jofj987
Wantjtojearnj$1.236
Distributionjofjthisjdocumentjisjillegal extrajperjyear?
