SOLUTION MANUAL Canadian Income Taxation 26th Edition by William Buckwold, All Chapters 1-23

SOLUTION MANUAL
Canadian Income Taxation 26th Edition
By William Buckwold, All Chapters 1-23

,TABLE OF CONTENTS
W W




Chapter1WTaxation-ItsWRoleWinWDecisionWMaking

Chapter2WFundamentalsWofWTaxWPlanning

ChapterW3WLiabilityWforWTax,WIncomeWDetermination,WandWAdministrationWofWtheWIncomeWTaxWSystem

ChapterW4WIncomeWfromWEmployment

ChapterW5WIncomeWfromWBusiness

ChapterW6WTheWAcquisition,WUse,WandWDisposalWofWDepreciableWProperty

Chapter7WIncomeWfromWProperty

Chapter8WGainsWandWLossesWonWtheWDispositionWofWCapitalWProperty-CapitalWGains

ChapterW9WOtherWIncome,WOtherWDeductions,WandWSpecialWRulesWforWCompletingWNetWIncomeWforWTaxWPurposes

ChapterW10WIndividuals:WDeterminationWofWTaxableWIncomeWandWTaxesWPayable

ChapterW11WCorporations-AnWIntroduction

ChapterW12WOrganization,WCapitalWStructures,WandWIncomeWDistributionsWofWCorporations

ChapterW13WTheWCanadian-ControlledWPrivateWCorporation

ChapterW14WMultipleWCorporationsWandWTheirWReorganization

ChapterW15WPartnerships

ChapterW16WLimitedWPartnershipsWandWJointWVentures

ChapterW17WTrusts

ChapterW18WBusinessWAcquisitionsWandWDivestitures-AssetsWversusWShares

ChapterW19WBusinessWAcquisitionsWandWDivestitures-Tax-DeferredWSales

ChapterW20WDomesticWandWInternationalWBusinessWExpansion

ChapterW21WTaxWAspectsWofWCorporateWFinancing

ChapterW22WIntroductionWtoWGST/HST

ChapterW23WBusinessWValuations

, CHAPTER 1 W




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




ReviewWQuestions

1. IfWincomeWtaxWisWimposedWafterWprofitsWhaveWbeenWdetermined,WwhyWisWtaxationWrelevantWtoWbus
inessWdecisionWmaking?

2. MostWbusinessWdecisionsWinvolveWtheWevaluationWofWalternativeWcoursesWofWaction.WForWexample
,WaWmarketingWmanagerWmayWbeWresponsibleWforWchoosingWaWstrategyWforWestablishingWsalesWinW
newWgeographicalWterritories.WBrieflyWexplainWhowWtheWtaxWfactorWcanWbeWanWintegralWpartWofWth
isWdecision.

3. WhatWareWtheWfundamentalWvariablesWofWtheWincomeWtaxWsystemWthatWdecision-
makersWshouldWbeWfamiliarWwithWsoWthatWtheyWcanWapplyWtaxWissuesWtoWtheirWareasWofWresponsibi
lity?

4. WhatWisWanW―after-tax‖WapproachWtoWdecisionWmaking?

SolutionsWtoWReviewWQuestions

R1-
1WOnceWprofitWisWdetermined,WtheWIncomeWTaxWActWdeterminesWtheWamountWofWincomeWtaxWthatWr
esults.WHowever,WatWallWlevelsWofWmanagement,WalternativeWcoursesWofWactionWareWevaluated.WInW
manyWcases,WtheWchoiceWofWoneWalternativeWoverWtheWotherWmayWaffectWbothWtheWamountWandWthe
WtimingWofWfutureWtaxesWonWincomeWgeneratedWfromWthatWactivity.WTherefore,WtheWpersonWmaking

WthoseWdecisionsWhasWaWdirectWinputWintoWfutureWafter-

taxWcashW flow.WObviously,WdecisionsWthatWreduceWorWpostponeWtheWpaymentWofWtaxWaffectWtheWult
imateWreturnWonWinvestmentWand,WinWturn,WtheWvalueWofWtheWenterprise.WIncludingWtheWtaxWvariabl
eWasWaWpartWofWtheWformalWdecisionWprocessWwillWultimatelyWleadWtoWimprovedWafter-
taxWcashWflow.

R1-
2WExpansionWcanWbeWachievedWinWnewWgeographicWareasWthroughWdirectWselling,WorWbyWestablishi
ngWaWformalWpresenceWinWtheWnewWterritoryWwithWaWbranchWofficeWorWaWseparateWcorporation.WThe
WnewWterritoriesWmayWalsoWcrossWprovincialWorWinternationalWboundaries.WProvincialWincomeWtaxWr

atesWvaryWamongstWtheWprovinces.WTheWamountWofWincomeWthatWisWsubjectWtoWtaxWinWtheWnewWpro
vinceWwillWbeWdifferentWforWeachWofWtheWthreeWalternativesWmentionedWabove.WForWexample,Wwith
WdirectWselling,WnoneWofWtheWincomeWisWtaxedWinWtheWnewWprovince,WbutWwithWaWseparateWcorporat

ion,WallWofWtheWincomeWisWtaxedWinWtheWnewWprovince.WBecauseWtheWtaxWcostWisWdifferentWinWeach
Wcase,WtaxationWisWaWrelevantWpartWofWtheWdecisionWandWmustWbeWincludedWinWanyWcost-

benefitWanalysisWthatWcomparesWtheWthreeWalternativesW[Reg.W400-402.1].

R1-
3WAWbasicWunderstandingWofWtheWfollowingWvariablesWwillWsignificantlyWstrengthenWaWdecisionWma
ker'sWabilityWtoWapplyWtaxWissuesWtoWtheirWareaWofWresponsibility.

, TypesWofWIncome - Employment,WBusiness,WProperty,WCapitalWgains

TaxableWEntities - Individuals,WCorporations,WTrusts

AlternativeWBusiness - Corporation,WProprietorship,WPartnership,WLimited
Structures partnership,WJointWarrangement,WIncomeWtrust

TaxWJurisdictions - Federal,WProvincial,WForeign

R1-
4WAllWcashWflowWdecisions,WwhetherWrelatedWtoWrevenues,Wexpenses,WassetWacquisitionsWorWdivestit
ures,WorWdebtWandWequityWrestructuring,WwillWimpactWtheWamountWandWtimingWofWtheWtaxWcost.W Th
erefore,W cashW flowW existsW onlyW onW anW afterW taxW basis,W and,W theW taxW impactsW whetherWorWnotWthe
WultimateWresultWofWtheWdecisionWisWsuccessful.WAnWafter-taxWapproachWtoWdecision-

makingWrequiresWeachWdecision-makerWtoWthinkW"after-
tax"WforWeveryWdecisionWatWtheWtimeWtheWdecisionWisWbeingWmade,Wand,WtoWconsiderWalternativeWco
ursesWofWactionWtoWminimizeWtheWtaxWcost,WinWtheWsameWwayWthatWdecisionsWareWmadeWregardingW
otherWtypesWofWcosts.

FailureW toW applyW anW after-
taxW approachW atW theW timeW thatW decisionsW areW madeW mayW provideWinaccurateWinformationWforWevaluation,W
and,WresultWinWaWpermanentlyWinefficientWtaxWstructure.




CHAPTER 2 W




FUNDAMENTALS OF TAX PLANNING W W W




ReviewWQuestions

1. ―TaxWplanningWandWtaxWavoidanceWmeanWtheWsameWthing.‖WIsWthisWstatementWtrue?WExplain.

2. WhatWdistinguishesWtaxWevasionWfromWtaxWavoidanceWandWtaxWplanning?

3. DoesWCanadaWRevenueWAgencyWdealWwithWallWtaxWavoidanceWactivitiesWinWtheWsameWway?WExpl
ain.

4. TheWpurposeWofWtaxWplanningWisWtoWreduceWorWdeferWtheWtaxWcostsWassociatedWwithWfinancialWtra
nsactions.WWhatWareWtheWgeneralWtypesWofWtaxWplanningWactivities?WBrieflyWexplainWhowWeachWo
fWthemWmayWreduceWorWdeferWtheWtaxWcost.

5. ―ItWisWalwaysWbetterWtoWpayWtaxWlaterWratherWthanWsooner.‖WIsWthisWstatementWtrue?WExplain.

6. WhenWcorporateWtaxWratesWareW13%WandWtaxWratesWforWindividualsWareW40%,WisWitWalwaysWbetter
WforWtheWindividualW toWtransferW theirW businessWtoWaWcorporation?




7. ―AsWlongWasWallWofWtheWincomeWtaxWrulesWareWknown,WaWtaxWplanWcanWbeWdevelopedWwithWcert
ainty.‖WIsWthisWstatementWtrue?WExplain.