SOLUTION MANAUAL FOR Canadian Income Taxation
2025/2026 Planning And Decision Making.20 Release:
Author: William Buckwold All Chapters Covered Latest
Version
FULL TEST BANK!!!
1|Page
, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2025 Ed.
Solution Manual for Canadian Income Taxation 2025 Edition by William Buckwold, Joan
Kitunen, Matthew Roman
CHAPTER 1
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
Review Questions
1. If income tax is imposed after profits have been determined, why is taxation relevant to business
decision making?
2. Most business decisions involve the evaluation of alternative courses of action. For example, a marketing
manager may be responsible for choosing a strategy for establishing sales in new geographical territories.
Briefly explain how the tax factor can be an integral part of this decision.
3. What are the fundamental variables of the income tax system that decision-makers should be familiar
with so that they can apply tax issues to their areas of responsibility?
4. What is an ―after-tax‖ approach to decision making?
Copyright © 2022 McGraw-Hill Education Ltd. 1
Instructor Solutions Manual Chapter
One
, Solutions to Review Questions
R1-1 Once profit is determined, the Income Tax Act determines the amount of income tax that results. However,
at all levels of management, alternative courses of action are evaluated. In many cases, the choice of one
alternative over the other may affect both the amount and the timing of future taxes on income generated
from that activity. Therefore, the person making those decisions has a direct input into future after-tax
cash flow. Obviously, decisions that reduce or postpone the payment of tax affect the ultimate return on
investment and, in turn, the value of the enter prise. Including the tax variable as a part of the formal
decision process will ultimately lead to improved after-tax cash flow.
R1-2 Expansion can be achieved in new geographic areas through direct selling, or by establishing a formal
presence in the new territory with a branch office or a separate corporation. The new territories may
also cross provincial or international boundaries. Provincial income tax rates vary amongst the provinces.
The amount of income that is subject to tax in the new province will be different for each of the three
alternatives mentioned above. For example, with direct selling, none of the income is taxed in the new
province, but with a separate corporation, all of the income is taxed in the new province. Because the
tax cost is different in each case, taxation is a relevant part of the decision and must be included in any
cost-benefit analysis that compares the three alternatives [Reg. 400-402.1].
R1-3 A basic understanding of the following variables will significantly strengthen a decision maker's ability to
apply tax issues to their area of responsibility.
Types of Income - Employment, Business, Property, Capital gains
Taxable Entities - Individuals, Corporations, Trusts
Alternative Business - Corporation, Proprietorship, Partnership, Limited
Structures partnership, Joint arrangement, Income trust
Tax Jurisdictions - Federal, Provincial, Foreign
R1-4 All cash flow decisions, whether related to revenues, expenses, asset acquisitions or divestitures, or debt
and equity restructuring, will impact the amount and timing of the tax cost. Therefore, cash flow exists
only on an after tax basis, and, the tax impacts whether or not the ultimate result of the decision is
successful. An after-tax approach to decision-making requires each decision-maker to think "after-tax"
for every decision at the time the decision is being made, and, to consider alternative courses of action to
minimize the tax cost, in the same way that decisions are made regarding other types of costs.
Failure to apply an after-tax approach at the time that decisions are made may provide inaccurate information
for evaluation, and, result in a permanently inefficient tax structure.
Copyright © 2022 McGraw-Hill Education Ltd. 2
3|Page
,
2025/2026 Planning And Decision Making.20 Release:
Author: William Buckwold All Chapters Covered Latest
Version
FULL TEST BANK!!!
1|Page
, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2025 Ed.
Solution Manual for Canadian Income Taxation 2025 Edition by William Buckwold, Joan
Kitunen, Matthew Roman
CHAPTER 1
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
Review Questions
1. If income tax is imposed after profits have been determined, why is taxation relevant to business
decision making?
2. Most business decisions involve the evaluation of alternative courses of action. For example, a marketing
manager may be responsible for choosing a strategy for establishing sales in new geographical territories.
Briefly explain how the tax factor can be an integral part of this decision.
3. What are the fundamental variables of the income tax system that decision-makers should be familiar
with so that they can apply tax issues to their areas of responsibility?
4. What is an ―after-tax‖ approach to decision making?
Copyright © 2022 McGraw-Hill Education Ltd. 1
Instructor Solutions Manual Chapter
One
, Solutions to Review Questions
R1-1 Once profit is determined, the Income Tax Act determines the amount of income tax that results. However,
at all levels of management, alternative courses of action are evaluated. In many cases, the choice of one
alternative over the other may affect both the amount and the timing of future taxes on income generated
from that activity. Therefore, the person making those decisions has a direct input into future after-tax
cash flow. Obviously, decisions that reduce or postpone the payment of tax affect the ultimate return on
investment and, in turn, the value of the enter prise. Including the tax variable as a part of the formal
decision process will ultimately lead to improved after-tax cash flow.
R1-2 Expansion can be achieved in new geographic areas through direct selling, or by establishing a formal
presence in the new territory with a branch office or a separate corporation. The new territories may
also cross provincial or international boundaries. Provincial income tax rates vary amongst the provinces.
The amount of income that is subject to tax in the new province will be different for each of the three
alternatives mentioned above. For example, with direct selling, none of the income is taxed in the new
province, but with a separate corporation, all of the income is taxed in the new province. Because the
tax cost is different in each case, taxation is a relevant part of the decision and must be included in any
cost-benefit analysis that compares the three alternatives [Reg. 400-402.1].
R1-3 A basic understanding of the following variables will significantly strengthen a decision maker's ability to
apply tax issues to their area of responsibility.
Types of Income - Employment, Business, Property, Capital gains
Taxable Entities - Individuals, Corporations, Trusts
Alternative Business - Corporation, Proprietorship, Partnership, Limited
Structures partnership, Joint arrangement, Income trust
Tax Jurisdictions - Federal, Provincial, Foreign
R1-4 All cash flow decisions, whether related to revenues, expenses, asset acquisitions or divestitures, or debt
and equity restructuring, will impact the amount and timing of the tax cost. Therefore, cash flow exists
only on an after tax basis, and, the tax impacts whether or not the ultimate result of the decision is
successful. An after-tax approach to decision-making requires each decision-maker to think "after-tax"
for every decision at the time the decision is being made, and, to consider alternative courses of action to
minimize the tax cost, in the same way that decisions are made regarding other types of costs.
Failure to apply an after-tax approach at the time that decisions are made may provide inaccurate information
for evaluation, and, result in a permanently inefficient tax structure.
Copyright © 2022 McGraw-Hill Education Ltd. 2
3|Page
,
