TESTBANK .
.
CanadianIncomeTaxation2022202325th
. . . .
CanadianEdition Buckwold
. . .
, Stuvia.com.-
.The.Marketplace.to.Buy.and.Sell.your.Study. MaterialStuvia.com.-
.The.Marketplace.to.Buy.and.Sell.your.Study.Material
Medconnoisseurlibraries.com
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.busines
s.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.decisi
on.
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
Downloaded.by:.destine465.|.
Page.1.of.987
Want.to.earn.$1.236
Distribution.of.this.document.is.illegal extra.per.year?
, Stuvia.com.-
.The.Marketplace.to.Buy.and.Sell.your.Study. MaterialStuvia.com.-
.The.Marketplace.to.Buy.and.Sell.your.Study.Material
Medconnoisseurlibraries.com
Solutions.to.Review.Questions
R1-
1.Once.profit.is.determined,.the.Income.Tax.Act.determines.the.amount.of.income.tax.that.results
..However,.at.all.levels.of.management,.alternative.courses.of.action.are.evaluated.. In. many. ca
ses,. the. choice. of. one. alternative. over. the. other. may. affect. both. the. amount.and. the. timing.
of. future. taxes. on. income. generated. from. that. activity.. Therefore,. the.person. making. those.
decisions. has. a. direct. input. into. future. after-
tax. cash. flow..Obviously,.decisions.that.reduce.or.postpone.the.payment.of.tax.affect.the.ultimat
e.return. on. investment. and,. in. turn,. the. value. of. the. enterprise.. Including. the. tax. variable. as. a.
part.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. establishing.
a.formal.presence.in.the.new.territory.with.a.branch.office.or.a.separate.corporation..The.new.terri
tories.may.also.cross.provincial.or.international.boundaries..Provincial.income.tax.rates.vary.am
ongst.the.provinces..The.amount.of.income.that.is.subject.to.tax.in.the.new.province.will.be.differe
nt.for.each.of.the.three.alternatives.mentioned.above..For.example,.with.direct.selling,.none.of.th
e.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.maker'
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
Structures
partnership,.Joint.arrangement,.Income.trust.Tax.J
urisdictions -. Federal,.Provincial,.Foreign
R1-
4.All.cash.flow.decisions,.whether.related.to.revenues,.expenses,.asset.acquisitions.or.divestitur
es,.or.debt.and.equity.restructuring,.will.impact.the.amount.and.timing.of.the.tax.cost.. Therefore,.
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.course
s.of.action.to.minimize.the.tax.cost,.in.the.same.way.that.decisions.are.made.regarding.other.type
s.of.costs.
Failure.to.apply.an.after-
tax.approach.at.the.time.that. decisions.are.made.may.provide. inaccurate.information.for.eval
uation,.and,.result.in.a.permanently.inefficient.tax.structure.
Downloaded.by:.destine465.|.
Page.2.of.987
Want.to.earn.$1.236
Distribution.of.this.document.is.illegal extra.per.year?
, Stuvia.com.-
.The.Marketplace.to.Buy.and.Sell.your.Study. MaterialStuvia.com.-
.The.Marketplace.to.Buy.and.Sell.your.Study.Material
Medconnoisseurlibraries.com
2
Downloaded.by:.destine465.|.
Page.3.of.987
Want.to.earn.$1.236
Distribution.of.this.document.is.illegal extra.per.year?
.
CanadianIncomeTaxation2022202325th
. . . .
CanadianEdition Buckwold
. . .
, Stuvia.com.-
.The.Marketplace.to.Buy.and.Sell.your.Study. MaterialStuvia.com.-
.The.Marketplace.to.Buy.and.Sell.your.Study.Material
Medconnoisseurlibraries.com
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.busines
s.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.decisi
on.
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
Downloaded.by:.destine465.|.
Page.1.of.987
Want.to.earn.$1.236
Distribution.of.this.document.is.illegal extra.per.year?
, Stuvia.com.-
.The.Marketplace.to.Buy.and.Sell.your.Study. MaterialStuvia.com.-
.The.Marketplace.to.Buy.and.Sell.your.Study.Material
Medconnoisseurlibraries.com
Solutions.to.Review.Questions
R1-
1.Once.profit.is.determined,.the.Income.Tax.Act.determines.the.amount.of.income.tax.that.results
..However,.at.all.levels.of.management,.alternative.courses.of.action.are.evaluated.. In. many. ca
ses,. the. choice. of. one. alternative. over. the. other. may. affect. both. the. amount.and. the. timing.
of. future. taxes. on. income. generated. from. that. activity.. Therefore,. the.person. making. those.
decisions. has. a. direct. input. into. future. after-
tax. cash. flow..Obviously,.decisions.that.reduce.or.postpone.the.payment.of.tax.affect.the.ultimat
e.return. on. investment. and,. in. turn,. the. value. of. the. enterprise.. Including. the. tax. variable. as. a.
part.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. establishing.
a.formal.presence.in.the.new.territory.with.a.branch.office.or.a.separate.corporation..The.new.terri
tories.may.also.cross.provincial.or.international.boundaries..Provincial.income.tax.rates.vary.am
ongst.the.provinces..The.amount.of.income.that.is.subject.to.tax.in.the.new.province.will.be.differe
nt.for.each.of.the.three.alternatives.mentioned.above..For.example,.with.direct.selling,.none.of.th
e.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.maker'
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
Structures
partnership,.Joint.arrangement,.Income.trust.Tax.J
urisdictions -. Federal,.Provincial,.Foreign
R1-
4.All.cash.flow.decisions,.whether.related.to.revenues,.expenses,.asset.acquisitions.or.divestitur
es,.or.debt.and.equity.restructuring,.will.impact.the.amount.and.timing.of.the.tax.cost.. Therefore,.
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.course
s.of.action.to.minimize.the.tax.cost,.in.the.same.way.that.decisions.are.made.regarding.other.type
s.of.costs.
Failure.to.apply.an.after-
tax.approach.at.the.time.that. decisions.are.made.may.provide. inaccurate.information.for.eval
uation,.and,.result.in.a.permanently.inefficient.tax.structure.
Downloaded.by:.destine465.|.
Page.2.of.987
Want.to.earn.$1.236
Distribution.of.this.document.is.illegal extra.per.year?
, Stuvia.com.-
.The.Marketplace.to.Buy.and.Sell.your.Study. MaterialStuvia.com.-
.The.Marketplace.to.Buy.and.Sell.your.Study.Material
Medconnoisseurlibraries.com
2
Downloaded.by:.destine465.|.
Page.3.of.987
Want.to.earn.$1.236
Distribution.of.this.document.is.illegal extra.per.year?
