kr
Solution Manual for Canadian
Income Taxation 2024-2025 25th
Edition by William Buckwold, Joan
Kitunen, Matthew Roman,newest
Version
kr
Instructor Solutions Manual Chapter One
kr kr kr kr
,kr
kr
Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2022-2023
kr kr kr kr kr kr kr kr
Ed.
kr
kr
Instructor Solutions Manual Chapter One
kr kr kr kr
, kr
CHAPTER 1
kr
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING kr kr kr kr kr kr
Review Questions
kr
1. If income tax is imposed after profits have been determined, why is taxation relevant to
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business decision making?
kr kr kr kr
2. Most business decisions involve the evaluation of alternative courses of action. For
kr kr kr kr kr kr kr kr kr kr kr
example, a marketing manager may be responsible for choosing a strategy for
kr kr kr kr kr kr kr kr kr kr kr kr
establishing sales in new geographical territories. Briefly explain how the tax factor
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can be an integral part of this decision.
kr kr kr kr kr kr kr kr kr
3. What are the fundamental variables of the income tax system that
kr kr decision-
kr kr kr kr kr kr kr kr k r
makers should be familiar with so that they can apply tax issues to their areas of
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
responsibility?
kr kr
4. What is an ―after-tax‖ approach to decision making?
kr kr kr kr kr kr kr kr
kr
Instructor Solutions Manual Chapter One
kr kr kr kr
, kr
kr
Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2022-2023
kr kr kr kr kr kr kr kr
Ed.
kr
Solutions to Review Questions
kr kr kr
R1-1 Once profit is determined, the Income Tax Act determines the amount of income tax that
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
results. However, at all levels of management, alternative courses of action are
kr kr kr kr kr kr kr kr kr kr kr kr
evaluated. In many cases, the choice of one alternative over the other may affect
kr kr kr kr kr kr kr kr kr kr kr kr kr kr
both the amount and the timing of future taxes on income generated from
kr kr kr kr k r k r k r k r k r k r k r k r k r
that activity. Therefore, the person making those decisions has a direct input into
k r k r k r k r kr kr kr kr kr kr kr kr kr
future after-tax cash flow. Obviously, decisions that reduce or postpone the payment
kr kr k r k r kr kr kr kr kr kr kr kr
of tax affect the ultimate return on investment and, in turn, the value of the enterprise.
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
Including the tax variable as a part of the formal decision process will ultimately lead to
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
improved after-tax cash flow.
kr kr kr kr kr
R1-2 Expansion can be achieved in new geographic areas through direct selling, or by
kr kr kr kr kr kr kr kr kr kr kr kr kr
establishing a formal presence in the new territory with a branch office or a separate
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
corporation. The new territories may also cross provincial or international boundaries.
kr kr kr kr kr kr kr kr kr kr kr
Provincial income tax rates vary amongst the provinces. The amount of income that is
kr kr kr kr kr kr kr kr kr kr kr kr kr kr
subject to tax in the new province will be different for each of the three alternatives
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
mentioned above. For example, with direct selling, none of the income is taxed in the
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
new province, but with a separate corporation, all of the income is taxed in the new
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
province. Because the tax cost is different in each case, taxation is a relevant part of
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
the decision and must be included in any cost-benefit analysis that compares the three
k r kr kr kr kr kr kr kr kr kr kr kr kr kr
alternatives [Reg. 400-402.1].
kr kr kr kr
R1-3 A basic understanding of the following variables will significantly strengthen a decision
kr kr kr kr kr kr kr kr kr kr kr kr
maker's ability to apply tax issues to their area of responsibility.
kr kr kr kr kr kr kr kr kr kr kr kr
Types of Income kr kr kr - kr Employment, Business, Property, Capital gains kr kr kr kr kr
Taxable Entities kr kr - kr Individuals, Corporations, Trusts kr kr kr
Alternative Business kr kr - kr Corporation, Proprietorship, Partnership, Limited kr kr kr kr
Structures kr partnership, Joint arrangement, Income trust kr kr kr kr kr
Tax Jurisdictionskr kr - kr Federal, Provincial, Foreign kr kr kr
R1-4 All cash flow decisions, whether related to revenues, expenses, asset acquisitions or
kr kr kr kr kr kr kr kr kr kr kr kr
divestitures, or debt and equity restructuring, will impact the amount and timing of the tax
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
cost. Therefore, cash flow exists only on an after tax basis, and, the tax impacts
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
whether or not the ultimate result of the decision is successful. An after-tax approach to
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
decision- making requires each decision-maker to think "after-tax" for every decision at
kr kr kr kr kr kr kr kr kr kr kr kr
the time the decision is being made, and, to consider alternative courses of action to
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
minimize the tax cost, in the same way that decisions are made regarding other types of
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
costs.kr kr
Failure to apply an after-tax approach at the time that decisions are made may
k r k r kr k r kr k r kr kr k r k r k r k r k r
provide inaccurate information for evaluation, and, result in a permanently inefficient tax
k r kr kr kr kr kr kr kr kr kr kr kr
structure.
kr kr
kr
Instructor Solutions Manual Chapter One
kr kr kr kr
Solution Manual for Canadian
Income Taxation 2024-2025 25th
Edition by William Buckwold, Joan
Kitunen, Matthew Roman,newest
Version
kr
Instructor Solutions Manual Chapter One
kr kr kr kr
,kr
kr
Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2022-2023
kr kr kr kr kr kr kr kr
Ed.
kr
kr
Instructor Solutions Manual Chapter One
kr kr kr kr
, kr
CHAPTER 1
kr
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING kr kr kr kr kr kr
Review Questions
kr
1. If income tax is imposed after profits have been determined, why is taxation relevant to
kr kr kr kr kr kr kr kr kr kr kr kr kr kr
business decision making?
kr kr kr kr
2. Most business decisions involve the evaluation of alternative courses of action. For
kr kr kr kr kr kr kr kr kr kr kr
example, a marketing manager may be responsible for choosing a strategy for
kr kr kr kr kr kr kr kr kr kr kr kr
establishing sales in new geographical territories. Briefly explain how the tax factor
kr kr kr kr kr kr kr kr kr kr kr kr
can be an integral part of this decision.
kr kr kr kr kr kr kr kr kr
3. What are the fundamental variables of the income tax system that
kr kr decision-
kr kr kr kr kr kr kr kr k r
makers should be familiar with so that they can apply tax issues to their areas of
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
responsibility?
kr kr
4. What is an ―after-tax‖ approach to decision making?
kr kr kr kr kr kr kr kr
kr
Instructor Solutions Manual Chapter One
kr kr kr kr
, kr
kr
Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2022-2023
kr kr kr kr kr kr kr kr
Ed.
kr
Solutions to Review Questions
kr kr kr
R1-1 Once profit is determined, the Income Tax Act determines the amount of income tax that
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
results. However, at all levels of management, alternative courses of action are
kr kr kr kr kr kr kr kr kr kr kr kr
evaluated. In many cases, the choice of one alternative over the other may affect
kr kr kr kr kr kr kr kr kr kr kr kr kr kr
both the amount and the timing of future taxes on income generated from
kr kr kr kr k r k r k r k r k r k r k r k r k r
that activity. Therefore, the person making those decisions has a direct input into
k r k r k r k r kr kr kr kr kr kr kr kr kr
future after-tax cash flow. Obviously, decisions that reduce or postpone the payment
kr kr k r k r kr kr kr kr kr kr kr kr
of tax affect the ultimate return on investment and, in turn, the value of the enterprise.
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
Including the tax variable as a part of the formal decision process will ultimately lead to
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
improved after-tax cash flow.
kr kr kr kr kr
R1-2 Expansion can be achieved in new geographic areas through direct selling, or by
kr kr kr kr kr kr kr kr kr kr kr kr kr
establishing a formal presence in the new territory with a branch office or a separate
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
corporation. The new territories may also cross provincial or international boundaries.
kr kr kr kr kr kr kr kr kr kr kr
Provincial income tax rates vary amongst the provinces. The amount of income that is
kr kr kr kr kr kr kr kr kr kr kr kr kr kr
subject to tax in the new province will be different for each of the three alternatives
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
mentioned above. For example, with direct selling, none of the income is taxed in the
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
new province, but with a separate corporation, all of the income is taxed in the new
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
province. Because the tax cost is different in each case, taxation is a relevant part of
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
the decision and must be included in any cost-benefit analysis that compares the three
k r kr kr kr kr kr kr kr kr kr kr kr kr kr
alternatives [Reg. 400-402.1].
kr kr kr kr
R1-3 A basic understanding of the following variables will significantly strengthen a decision
kr kr kr kr kr kr kr kr kr kr kr kr
maker's ability to apply tax issues to their area of responsibility.
kr kr kr kr kr kr kr kr kr kr kr kr
Types of Income kr kr kr - kr Employment, Business, Property, Capital gains kr kr kr kr kr
Taxable Entities kr kr - kr Individuals, Corporations, Trusts kr kr kr
Alternative Business kr kr - kr Corporation, Proprietorship, Partnership, Limited kr kr kr kr
Structures kr partnership, Joint arrangement, Income trust kr kr kr kr kr
Tax Jurisdictionskr kr - kr Federal, Provincial, Foreign kr kr kr
R1-4 All cash flow decisions, whether related to revenues, expenses, asset acquisitions or
kr kr kr kr kr kr kr kr kr kr kr kr
divestitures, or debt and equity restructuring, will impact the amount and timing of the tax
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
cost. Therefore, cash flow exists only on an after tax basis, and, the tax impacts
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
whether or not the ultimate result of the decision is successful. An after-tax approach to
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
decision- making requires each decision-maker to think "after-tax" for every decision at
kr kr kr kr kr kr kr kr kr kr kr kr
the time the decision is being made, and, to consider alternative courses of action to
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
minimize the tax cost, in the same way that decisions are made regarding other types of
kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr kr
costs.kr kr
Failure to apply an after-tax approach at the time that decisions are made may
k r k r kr k r kr k r kr kr k r k r k r k r k r
provide inaccurate information for evaluation, and, result in a permanently inefficient tax
k r kr kr kr kr kr kr kr kr kr kr kr
structure.
kr kr
kr
Instructor Solutions Manual Chapter One
kr kr kr kr
