SOLUTION MANUAL FOR CANADIAN INCOME TAXATION 25th EDITION BY WILLIAM BUCKWOLD, JOAN KITUNEN, MATHEW ROMAN UPDATED VERSION 2023/2024 COMPLETE.

Solution Manual for Canadian Income
Taxation 25th Editionby William Buckwold,
Joan Kitunen, Matthew Roman-latest-2023-
2024

CHAPTER 1 K




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




Review Questions
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1. If income tax is imposed after profits have been determined, why is taxation relevant to
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business decision making?
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2. Most business decisions involve the evaluation of alternative courses of action. For
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example, a marketing manager may be responsible for choosing a strategy for establishing
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sales in new geographical territories. Briefly explain how the tax factor can be an integral
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part of this decision.
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3. What are the fundamental variables of the income tax system that decision-makers should
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be familiar with so that they can apply tax issues to their areas of responsibility?
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4. What is an ―after-tax‖ approach to decision making?
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Instructor Solutions Manual Chapter One
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, Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2022-2023 Ed.
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Instructor Solutions Manual Chapter One
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,Solutions to Review Questions K K K




R1-1 Once profit is determined, the Income Tax Act determines the amount of income tax that
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results. However, at all levels of management, alternative courses of action are evaluated. In
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many cases, the choice of one alternative over the other may affect both the amount and the
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timing of future taxes on income generated from that activity. Therefore, the person making
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those decisions has a direct input into future after-tax cash flow. Obviously, decisions that
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reduce or postpone the payment of tax affect the ultimate return on investment and, in turn,
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the value of the enterprise. Including the tax variable as a part of the formal decision process
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will ultimately lead to improved after-tax cash flow.
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R1-2 Expansion can be achieved in new geographic areas through direct selling, or by establishing
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a formal presence in the new territory with a branch office or a separate corporation. The new
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territories may also cross provincial or international boundaries. Provincial income tax rates
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vary amongst the provinces. The amount of income that is subject to tax in the new province
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will be different for each of the three alternatives mentioned above. For example, with direct
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selling, none of the income is taxed in the new province, but with a separate corporation, all of
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the income is taxed in the new province. Because the tax cost is different in each case,
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taxation is a relevant part of the decision and must be included in any cost-benefit analysis
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that compares the three alternatives [Reg. 400-402.1].
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R1-3 A basic understanding of the following variables will significantly strengthen a decision
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maker's ability to apply tax issues to their area of responsibility.
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Types of Income K K - Employment, Business, Property, Capital gains K K K K




Taxable Entities K - Individuals, Corporations, Trusts K K




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




Structures partnership, Joint arrangement, Income trust K K K K




Tax Jurisdictions K - Federal, Provincial, Foreign K K




R1-4 All cash flow decisions, whether related to revenues, expenses, asset acquisitions or
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divestitures, or debt and equity restructuring, will impact the amount and timing of the tax
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cost. Therefore, cash flow exists only on an after tax basis, and, the tax impacts whether or
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not the ultimate result of the decision is successful. An after-tax approach to decision-
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making requires each decision-maker to think "after-tax" for every decision at the time the
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decision is being made, and, to consider alternative courses of action to minimize the tax
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cost, in the same way that decisions are made regarding other types of costs.
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Failure to apply an after-tax approach at the time that decisions are made may provide
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inaccurate information for evaluation, and, result in a permanently inefficient tax structure.
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Instructor Solutions Manual Chapter One K K K K

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