Canadian Income Taxation, 2023/2024: Plannin
. . . .
g andDecisionMaking26th Edition by
. . . . .
. William Buckwold
.
, Buckwold,.Kitunen,.Roman.and.Iqbal,.Canadian.Income.Taxation,.2023-2024.Ed.
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.busine
ss.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.decisio
n.
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?
. 1
Instructor.Solutions.Manual.Chapter.One
, Buckwold,.Kitunen,.Roman.and.Iqbal,.Canadian.Income.Taxation,.2023-2024.Ed.
Solutions.to.Review.Questions
R1-
1.Once.profit.is.determined,.the.Income.Tax.Act.determines.the.amount.of.income.tax.that.resul
ts..However,.at.all.levels.of.management,.alternative.courses.of.action.are.evaluated..In.many.c
ases,.the.choice.of.one.alternative.over.the.other.may.affect.both.the.amount.and.the.timing.of.fut
ure.taxes.on.income.generated.from.that.activity..Therefore,.the.person.making.those.decision
s.has.a.direct.input.into.future.after-
tax.cash.flow..Obviously,.decisions.that.reduce.or.postpone.the.payment.of.tax.affect.the.ultima
te.return.on.investment.and,.in.turn,.the.value.of.the.enterprise..Including.the.tax.variable.as.a.p
art.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.establishin
g.a.formal.presence.in.the.new.territory.with.a.branch.office.or.a.separate.corporation..The.new.t
erritories.may.also.cross.provincial.or.international.boundaries..Provincial.income.tax.rates.var
y.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,.n
one.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.make
r's.ability.to.apply.tax.issues.to.their.area.of.responsibility.
Types.of.Income -
Employment,.Business,.Property,.Capital.gains.Taxa
ble.Entities - Individuals,.Corporations,.Trusts
Alternative.Business -
Corporation,.Proprietorship,.Partnership,.Limited.Stru
ctures partnership,.Joint.arrangement,.Income.trust
Tax.Jurisdictions - Federal,.Provincial,.Foreign
R1-
4.All.cash.flow.decisions,.whether.related.to.revenues,.expenses,.asset.acquisitions.or.divestit
ures,.or.debt.and.equity.restructuring,.will.impact.the.amount.and.timing.of.the.tax.cost..Therefo
re,.cash.flow.exists.only.on.an.after.tax.basis,.and,.the.tax.impacts.whether.or.not.the.ultimate.res
ult.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.cours
es.of.action.to.minimize.the.tax.cost,.in.the.same.way.that.decisions.are.made.regarding.other.ty
pes.of.costs.
Failure.to.apply. an.after-
tax.approach. at. the.time.that. decisions. are.made.may.provide.inaccurate.information.for.evaluation,.a
nd,.result.in.a.permanently.inefficient.tax.structure.
, Buckwold,.Kitunen,.Roman.and.Iqbal,.Canadian.Income.Taxation,.2023-2024.Ed.
CHAPTER 1 .
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
. . . . . .
. 2
Instructor.Solutions.Manual.Chapter.One
. . . .
g andDecisionMaking26th Edition by
. . . . .
. William Buckwold
.
, Buckwold,.Kitunen,.Roman.and.Iqbal,.Canadian.Income.Taxation,.2023-2024.Ed.
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.busine
ss.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.decisio
n.
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?
. 1
Instructor.Solutions.Manual.Chapter.One
, Buckwold,.Kitunen,.Roman.and.Iqbal,.Canadian.Income.Taxation,.2023-2024.Ed.
Solutions.to.Review.Questions
R1-
1.Once.profit.is.determined,.the.Income.Tax.Act.determines.the.amount.of.income.tax.that.resul
ts..However,.at.all.levels.of.management,.alternative.courses.of.action.are.evaluated..In.many.c
ases,.the.choice.of.one.alternative.over.the.other.may.affect.both.the.amount.and.the.timing.of.fut
ure.taxes.on.income.generated.from.that.activity..Therefore,.the.person.making.those.decision
s.has.a.direct.input.into.future.after-
tax.cash.flow..Obviously,.decisions.that.reduce.or.postpone.the.payment.of.tax.affect.the.ultima
te.return.on.investment.and,.in.turn,.the.value.of.the.enterprise..Including.the.tax.variable.as.a.p
art.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.establishin
g.a.formal.presence.in.the.new.territory.with.a.branch.office.or.a.separate.corporation..The.new.t
erritories.may.also.cross.provincial.or.international.boundaries..Provincial.income.tax.rates.var
y.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,.n
one.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.make
r's.ability.to.apply.tax.issues.to.their.area.of.responsibility.
Types.of.Income -
Employment,.Business,.Property,.Capital.gains.Taxa
ble.Entities - Individuals,.Corporations,.Trusts
Alternative.Business -
Corporation,.Proprietorship,.Partnership,.Limited.Stru
ctures partnership,.Joint.arrangement,.Income.trust
Tax.Jurisdictions - Federal,.Provincial,.Foreign
R1-
4.All.cash.flow.decisions,.whether.related.to.revenues,.expenses,.asset.acquisitions.or.divestit
ures,.or.debt.and.equity.restructuring,.will.impact.the.amount.and.timing.of.the.tax.cost..Therefo
re,.cash.flow.exists.only.on.an.after.tax.basis,.and,.the.tax.impacts.whether.or.not.the.ultimate.res
ult.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.cours
es.of.action.to.minimize.the.tax.cost,.in.the.same.way.that.decisions.are.made.regarding.other.ty
pes.of.costs.
Failure.to.apply. an.after-
tax.approach. at. the.time.that. decisions. are.made.may.provide.inaccurate.information.for.evaluation,.a
nd,.result.in.a.permanently.inefficient.tax.structure.
, Buckwold,.Kitunen,.Roman.and.Iqbal,.Canadian.Income.Taxation,.2023-2024.Ed.
CHAPTER 1 .
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
. . . . . .
. 2
Instructor.Solutions.Manual.Chapter.One
