Q
Q
, Q
Solution manual for Cana
Q Q Q
dian Income Taxation 202
Q Q Q
22023 25th Edition by Will
Q Q Q Q
iam Buckwold, Joan Kitun
Q Q Q
en, Matthew Roman
Q Q Q
Q
Q
, Q
CHAPTER 1 Q
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
Q Q Q Q Q Q
ReviewQQuestions
1. IfQincomeQtaxQisQimposedQafterQprofitsQhaveQbeenQdetermined,QwhyQisQtaxationQrelevantQtoQ
businessQdecisionQmaking?QQQ
2. MostQbusinessQdecisionsQinvolveQtheQevaluationQofQalternativeQcoursesQofQaction.QForQexa
mple,QaQmarketingQmanagerQmayQbeQresponsibleQforQchoosingQaQ strategyQ forQestablishing
QsalesQ inQnewQgeographicalQ territories.QBrieflyQexplainQ howQtheQtaxQ factorQcanQbeQanQinte
gralQpartQofQthisQdecision.QQQ
3. WhatQareQtheQfundamentalQvariablesQofQtheQincomeQtaxQ systemQ thatQ decision-
makersQshouldQbeQfamiliarQwithQsoQthatQtheyQcanQapplyQtaxQissuesQtoQtheirQareasQofQresponsi
bility?QQQ
4. WhatQisQanQ―after-tax‖QapproachQtoQdecisionQmaking?QQQ
1
QQQ
Q
Q
, Q
SolutionsQtoQReviewQQuestions
R1-
1QOnceQprofitQisQdetermined,QtheQIncomeQTaxQActQdeterminesQtheQamountQofQincomeQtaxQtha
tQresults.Q However,Q atQ allQ levelsQ ofQ management,Q alternativeQ coursesQ ofQ actionQ areQ evaluat
ed.QInQ manyQ cases,Q theQ choiceQ ofQ oneQ alternativeQ overQ theQ otherQ mayQ affectQ bothQ theQ a
mountQandQtheQtimingQofQfutureQtaxesQonQincomeQgeneratedQfromQ thatQ activity.Q Therefore,
Q theQpersonQmakingQthoseQdecisionsQhasQaQdirectQinputQ intoQ futureQ after-
taxQ cashQ flow.QObviously,Q decisionsQ thatQ reduceQ orQ postponeQ theQ paymentQ ofQ taxQ affectQ t
heQ ultimateQ returnQonQ investmentQ and,Q inQ turn,Q theQ valueQ ofQ theQ enterprise.Q IncludingQ theQ t
axQ variableQ asQ aQ partQofQtheQformalQdecisionQprocessQwillQultimatelyQleadQtoQimprovedQafter-
taxQcashQflow.QQQ
R1-
2QExpansionQcanQbeQachievedQinQnewQgeographicQareasQthroughQdirectQselling,QorQ byQestab
lishingQaQformalQpresenceQinQtheQnewQterritoryQwithQaQbranchQofficeQorQaQseparateQcorporatio
n.QTheQnewQterritoriesQmayQalsoQcrossQprovincialQorQinternationalQboundaries.QProvincialQinc
omeQtaxQratesQvaryQamongstQtheQprovinces.QTheQamountQofQincomeQthatQisQsubjectQtoQtaxQin
QtheQnewQprovinceQwillQbeQdifferentQforQeachQofQtheQthreeQalternativesQmentionedQabove.QFor
Qexample,QwithQdirectQselling,QnoneQofQtheQincomeQisQtaxedQinQtheQnewQprovince,QbutQwithQaQ
separateQcorporation,QallQofQtheQincomeQisQtaxedQinQtheQnewQprovince.QBecauseQ theQ taxQ cos
tQ isQ differentQ inQ eachQ case,Q taxationQ isQ aQ relevantQ partQ ofQ theQ decisionQandQmustQbeQinclu
dedQinQanyQcost-benefitQanalysisQthatQcomparesQtheQ threeQ alternativesQ[Reg.Q400-402.1].QQQ
R1-
3QAQbasicQunderstandingQofQtheQfollowingQvariablesQwillQsignificantlyQstrengthenQaQdecisionQ
maker'sQabilityQtoQapplyQtaxQissuesQtoQtheirQareaQofQresponsibility.QQQ
TypesQofQIncome -
Employment,QBusiness,QProperty,QCapitalQgainsQT
axableQEntities - Individuals,QCorporations,QTrustsQQQ
AlternativeQBusiness - Corporation,QProprietorship,QPartnership,QLimitedQQQ
Structures
partnership,QJointQarrangement,QIncomeQtrustQTax
Q Jurisdictions -Q Federal,QProvincial,QForeignQQQ
R1-
4QAllQcashQflowQdecisions,QwhetherQrelatedQtoQrevenues,Qexpenses,QassetQacquisitionsQorQdi
vestitures,QorQdebtQandQequityQrestructuring,QwillQimpactQtheQamountQandQtimingQofQtheQtaxQc
ost.Q Therefore,Q cashQ flowQ existsQ onlyQ onQ anQ afterQ taxQ basis,Q and,Q theQ taxQ impactsQ whethe
rQorQnotQtheQultimateQresultQofQtheQdecisionQisQsuccessful.QAnQafter-taxQapproachQtoQdecision-
QmakingQrequiresQeachQdecision-makerQtoQthinkQ"after-
tax"QforQeveryQdecisionQatQtheQtimeQtheQdecisionQisQbeingQmade,Qand,QtoQconsiderQalternative
QcoursesQofQactionQtoQminimizeQtheQtaxQcost,QinQtheQsameQwayQthatQdecisionsQareQmadeQrega
rdingQotherQtypesQofQcosts.QQQ
FailureQ toQ applyQ anQ after-
taxQ approachQ atQ theQ timeQ thatQ decisionsQ areQ madeQ mayQ provideQinaccurateQinformationQforQev
aluation,Qand,QresultQinQaQpermanentlyQinefficientQtaxQstructure.QQQ
Q
Q
Q
, Q
Solution manual for Cana
Q Q Q
dian Income Taxation 202
Q Q Q
22023 25th Edition by Will
Q Q Q Q
iam Buckwold, Joan Kitun
Q Q Q
en, Matthew Roman
Q Q Q
Q
Q
, Q
CHAPTER 1 Q
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
Q Q Q Q Q Q
ReviewQQuestions
1. IfQincomeQtaxQisQimposedQafterQprofitsQhaveQbeenQdetermined,QwhyQisQtaxationQrelevantQtoQ
businessQdecisionQmaking?QQQ
2. MostQbusinessQdecisionsQinvolveQtheQevaluationQofQalternativeQcoursesQofQaction.QForQexa
mple,QaQmarketingQmanagerQmayQbeQresponsibleQforQchoosingQaQ strategyQ forQestablishing
QsalesQ inQnewQgeographicalQ territories.QBrieflyQexplainQ howQtheQtaxQ factorQcanQbeQanQinte
gralQpartQofQthisQdecision.QQQ
3. WhatQareQtheQfundamentalQvariablesQofQtheQincomeQtaxQ systemQ thatQ decision-
makersQshouldQbeQfamiliarQwithQsoQthatQtheyQcanQapplyQtaxQissuesQtoQtheirQareasQofQresponsi
bility?QQQ
4. WhatQisQanQ―after-tax‖QapproachQtoQdecisionQmaking?QQQ
1
QQQ
Q
Q
, Q
SolutionsQtoQReviewQQuestions
R1-
1QOnceQprofitQisQdetermined,QtheQIncomeQTaxQActQdeterminesQtheQamountQofQincomeQtaxQtha
tQresults.Q However,Q atQ allQ levelsQ ofQ management,Q alternativeQ coursesQ ofQ actionQ areQ evaluat
ed.QInQ manyQ cases,Q theQ choiceQ ofQ oneQ alternativeQ overQ theQ otherQ mayQ affectQ bothQ theQ a
mountQandQtheQtimingQofQfutureQtaxesQonQincomeQgeneratedQfromQ thatQ activity.Q Therefore,
Q theQpersonQmakingQthoseQdecisionsQhasQaQdirectQinputQ intoQ futureQ after-
taxQ cashQ flow.QObviously,Q decisionsQ thatQ reduceQ orQ postponeQ theQ paymentQ ofQ taxQ affectQ t
heQ ultimateQ returnQonQ investmentQ and,Q inQ turn,Q theQ valueQ ofQ theQ enterprise.Q IncludingQ theQ t
axQ variableQ asQ aQ partQofQtheQformalQdecisionQprocessQwillQultimatelyQleadQtoQimprovedQafter-
taxQcashQflow.QQQ
R1-
2QExpansionQcanQbeQachievedQinQnewQgeographicQareasQthroughQdirectQselling,QorQ byQestab
lishingQaQformalQpresenceQinQtheQnewQterritoryQwithQaQbranchQofficeQorQaQseparateQcorporatio
n.QTheQnewQterritoriesQmayQalsoQcrossQprovincialQorQinternationalQboundaries.QProvincialQinc
omeQtaxQratesQvaryQamongstQtheQprovinces.QTheQamountQofQincomeQthatQisQsubjectQtoQtaxQin
QtheQnewQprovinceQwillQbeQdifferentQforQeachQofQtheQthreeQalternativesQmentionedQabove.QFor
Qexample,QwithQdirectQselling,QnoneQofQtheQincomeQisQtaxedQinQtheQnewQprovince,QbutQwithQaQ
separateQcorporation,QallQofQtheQincomeQisQtaxedQinQtheQnewQprovince.QBecauseQ theQ taxQ cos
tQ isQ differentQ inQ eachQ case,Q taxationQ isQ aQ relevantQ partQ ofQ theQ decisionQandQmustQbeQinclu
dedQinQanyQcost-benefitQanalysisQthatQcomparesQtheQ threeQ alternativesQ[Reg.Q400-402.1].QQQ
R1-
3QAQbasicQunderstandingQofQtheQfollowingQvariablesQwillQsignificantlyQstrengthenQaQdecisionQ
maker'sQabilityQtoQapplyQtaxQissuesQtoQtheirQareaQofQresponsibility.QQQ
TypesQofQIncome -
Employment,QBusiness,QProperty,QCapitalQgainsQT
axableQEntities - Individuals,QCorporations,QTrustsQQQ
AlternativeQBusiness - Corporation,QProprietorship,QPartnership,QLimitedQQQ
Structures
partnership,QJointQarrangement,QIncomeQtrustQTax
Q Jurisdictions -Q Federal,QProvincial,QForeignQQQ
R1-
4QAllQcashQflowQdecisions,QwhetherQrelatedQtoQrevenues,Qexpenses,QassetQacquisitionsQorQdi
vestitures,QorQdebtQandQequityQrestructuring,QwillQimpactQtheQamountQandQtimingQofQtheQtaxQc
ost.Q Therefore,Q cashQ flowQ existsQ onlyQ onQ anQ afterQ taxQ basis,Q and,Q theQ taxQ impactsQ whethe
rQorQnotQtheQultimateQresultQofQtheQdecisionQisQsuccessful.QAnQafter-taxQapproachQtoQdecision-
QmakingQrequiresQeachQdecision-makerQtoQthinkQ"after-
tax"QforQeveryQdecisionQatQtheQtimeQtheQdecisionQisQbeingQmade,Qand,QtoQconsiderQalternative
QcoursesQofQactionQtoQminimizeQtheQtaxQcost,QinQtheQsameQwayQthatQdecisionsQareQmadeQrega
rdingQotherQtypesQofQcosts.QQQ
FailureQ toQ applyQ anQ after-
taxQ approachQ atQ theQ timeQ thatQ decisionsQ areQ madeQ mayQ provideQinaccurateQinformationQforQev
aluation,Qand,QresultQinQaQpermanentlyQinefficientQtaxQstructure.QQQ
Q
Q
