SOLUTION MANUAL for Canadian Income Taxation, 2023/2024: Planning and Decision Making 26th Edition By William Buckwold COMPLETE CHAPTERS 1-23 WITH EXPERT VERIFIED QUESTIONS & SOLUTIONS| A+ GRADED

SOLUTION MANUAL for Canadian
Income Taxation, 2023/2024: Planning
and Decision Making 26th Edition By
William Buckwold
COMPLETE CHAPTERS 1-23 WITH EXPERT VERIFIED
QUESTIONS & SOLUTIONS| A+ GRADED




Page 1 of 1307

, CHAPTER 1

TAXATION- ITS ROLE IN BUSINESS DECISION MAKING M M M M M M




Review Questions M




1. If income tax is imposed after profits have been determined, why is taxation relevant to
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business decision making?
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2. Most business decisions involve the evaluation of alternative courses of action. For example, a
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Mmarketing manager may be responsible for choosing a strategy for establishing sales in new
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geographical territories. Briefly explain how the tax factor can be an integral part of this decision.
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3. What are the fundamental variables of the income tax system that decision-makers should
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be familiar with so that they can apply tax issues to their areas of responsibility?
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4. What is an ―after-tax‖ approach to decision making?
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Solutions to Review Questions M M M




R1-1 Once profit is determined, the Income Tax Act determines the amount of income tax that results.
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However, at all levels of management, alternative courses of action are evaluated. In many cases, the
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choice of one alternative over the other may affect both the amount and the timing of future taxes on
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income generated from that activity. Therefore, the person making those decisions has a direct input
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into future after-tax cash flow. Obviously, decisions that reduce or postpone the payment of tax affect
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the ultimate return on investment and, in turn, the value of the enterprise. Including the tax variable as
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a part of the formal decision process will ultimately lead to improved after-tax cash flow.
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R1-2 Expansion can be achieved in new geographic areas through direct selling, or by establishing a
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formal presence in the new territory with a branch office or a separate corporation. The new territories
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may also cross provincial or international boundaries. Provincial income tax rates vary amongst the
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provinces. The amount of income that is subject to tax in the new province will be different for each
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of the three alternatives mentioned above. For example, with direct selling, none of the income is
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taxed in the new province, but with a separate corporation, all of the income is taxed in the new
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province. Because the tax cost is different in each case, taxation is a relevant part of the decision and
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must be included in any cost-benefit analysis that compares the three alternatives [Reg. 400-402.1].
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R1-3 A basic understanding of the following variables will significantly strengthen a decision maker's
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ability to apply tax issues to their area of responsibility.
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Types of Income -
M Employment, Business, Property, Capital gains Taxable Entities
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- Individuals, Corporations, Trusts
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Page 2 of 1307

,Alternative Business - Corporation, Proprietorship, Partnership, Limited Structures
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partnership, Joint arrangement, Income trust
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Tax Jurisdictions
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R1-4 All cash flow decisions, whether related to revenues, expenses, asset acquisitions or divestitures,
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or debt and equity restructuring, will impact the amount and timing of the tax cost. Therefore, cash
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flow exists only on an after tax basis, and, the tax impacts whether or not the ultimate result of the
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decision is successful. An after-tax approach to decision-making requires each decision-maker to think
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"after-tax" for every decision at the time the decision is being made, and, to consider alternative
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courses of action to minimize the tax cost, in the same way that decisions are made regarding other
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types of costs.
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Failure to apply an after-tax approach at the time that decisions are made may provide inaccurate
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information for evaluation, and, result in a permanently inefficient tax structure.
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CHAPTER 2 M




M FUNDAMENTALS OF TAX PLANNING M M M




Review Questions M




1. ―Tax planning and tax avoidance mean the same thing.‖ Is this statement true? Explain.
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2. What distinguishes tax evasion from tax avoidance and tax planning?
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3. Does Canada Revenue Agency deal with all tax avoidance activities in the same way? Explain.
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4. The purpose of tax planning is to reduce or defer the tax costs associated with financial
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transactions. What are the general types of tax planning activities? Briefly explain how each of them
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may reduce or defer the tax cost.
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5. ―It is always better to pay tax later rather than sooner.‖ Is this statement true? Explain.
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6. When corporate tax rates are 13% and tax rates for individuals are 40%, is it always better for
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the individual to transfer their business to a corporation?
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7. ―As long as all of the income tax rules are known, a tax plan can be developed with certainty.‖ Is
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this statement true? Explain.
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8. What basic skills are required to develop a good tax plan?
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9. An entrepreneur is developing a new business venture and is planning to raise equity capital
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from individual investors. Their adviser indicates that the venture could be structured as a corporation
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Page 3 of 1307

, (i.e., shares are issued to the investors) or as a limited partnership (i.e., partnership units are sold).
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Both
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Page 4 of 1307