Solution To AP One - 1
CHAPTER ONE SOLUTIONS
Solution to Assignment Problem One - 1
Note To Instructor If you are assigning this problem, note that only the first two
answers can be found in Chapter 1 of the text.
The circumstances under which a general provision of the Income Tax Act can be overridden
are as follows:
1. In those situations where there is a conflict between the provisions of an international tax
treaty and the Income Tax Act, the terms of the international tax treaty will prevail.
2. While court decisions cannot be used to change the actual tax law, court decisions may
call into question the reasonableness of interpretations of the ITA made by either the CRA
or tax practitioners.
3. In some cases, a more specific provision of the Act will contain an exception to a general
rule. For example, while ITA 18(1)(b) does not allow the deduction of capital expendi-
tures in computing business income, ITA 20(1)(aa) contains a provision that allows the
deduction of landscaping costs.
Solutions Manual for Canadian Tax Principles 2018 - 2019 1
, Solution To AP One - 2
Solution to Assignment Problem One - 2
Some of the possible examples of conflicts between objectives would be as follows:
1. Revenue Generation And International Competitiveness The need to lower rates of
taxation in order to be competitive on an international basis is in conflict with the need to
generate revenues.
2. Fairness And Simplicity In order to make a tax system simple, a single or small number
of tax rates must be applied to a well established concept of income with only a limited
number of deductions or exceptions available. This is in conflict with the goal of tailoring
the system to be fair to specific types of individuals, such as the disabled.
3. Revenue Generation And Social Goals The desire to provide funds to certain types of
individuals (Old Age Security) or to provide certain types of services (health care) may be
in conflict with the need to generate tax revenues.
4. Flexibility And Certainty To make a tax system flexible in changing economic, polit-
ical, and social circumstances, there must be some uncertainty.
Solutions Manual for Canadian Tax Principles 2018 - 2019 2
CHAPTER ONE SOLUTIONS
Solution to Assignment Problem One - 1
Note To Instructor If you are assigning this problem, note that only the first two
answers can be found in Chapter 1 of the text.
The circumstances under which a general provision of the Income Tax Act can be overridden
are as follows:
1. In those situations where there is a conflict between the provisions of an international tax
treaty and the Income Tax Act, the terms of the international tax treaty will prevail.
2. While court decisions cannot be used to change the actual tax law, court decisions may
call into question the reasonableness of interpretations of the ITA made by either the CRA
or tax practitioners.
3. In some cases, a more specific provision of the Act will contain an exception to a general
rule. For example, while ITA 18(1)(b) does not allow the deduction of capital expendi-
tures in computing business income, ITA 20(1)(aa) contains a provision that allows the
deduction of landscaping costs.
Solutions Manual for Canadian Tax Principles 2018 - 2019 1
, Solution To AP One - 2
Solution to Assignment Problem One - 2
Some of the possible examples of conflicts between objectives would be as follows:
1. Revenue Generation And International Competitiveness The need to lower rates of
taxation in order to be competitive on an international basis is in conflict with the need to
generate revenues.
2. Fairness And Simplicity In order to make a tax system simple, a single or small number
of tax rates must be applied to a well established concept of income with only a limited
number of deductions or exceptions available. This is in conflict with the goal of tailoring
the system to be fair to specific types of individuals, such as the disabled.
3. Revenue Generation And Social Goals The desire to provide funds to certain types of
individuals (Old Age Security) or to provide certain types of services (health care) may be
in conflict with the need to generate tax revenues.
4. Flexibility And Certainty To make a tax system flexible in changing economic, polit-
ical, and social circumstances, there must be some uncertainty.
Solutions Manual for Canadian Tax Principles 2018 - 2019 2
