SOLUTION MANUAL FOR -CANADIAN INCOME TAXATION 25th EDITION BY WILLIAM BUCKWOLD, JOAN KITUNEN, MATHEW ROMAN/ COMPLETE 'ULTIMATE GUIDE A+

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Solution Manual for Canadian
Income Taxation 2024-2025 25th
Edition by William Buckwold, Joan
Kitunen, Matthew Roman,newest
Version




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Instructor Solutions Manual Chapter One
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Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2022-2023
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Ed.
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Instructor Solutions Manual Chapter One
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CHAPTER 1
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TAXATION― ITS ROLE IN BUSINESS DECISION MAKING kr kr kr kr kr kr




Review Questions
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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
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example, a marketing manager may be responsible for choosing a strategy for
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establishing sales in new geographical territories. Briefly explain how the tax factor
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can be an integral part of this decision.
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3. What are the fundamental variables of the income tax system that
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makers should be familiar with so that they can apply tax issues to their areas of
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responsibility?
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4. What is an ―after-tax‖ approach to decision making?
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Instructor Solutions Manual Chapter One
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Buckwold, Kitunen, Roman and Iqbal, Canadian Income Taxation, 2022-2023
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Ed.
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Solutions to Review Questions
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R1-1 Once profit is determined, the Income Tax Act determines the amount of income tax that
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results. However, at all levels of management, alternative courses of action are
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evaluated. In many cases, the choice of one alternative over the other may affect
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both the amount and the timing of future taxes on income generated from
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that activity. Therefore, the person making those decisions has a direct input into
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future after-tax cash flow. Obviously, decisions that reduce or postpone the payment
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of tax affect the ultimate return on investment and, in turn, the value of the enterprise.
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Including the tax variable as a part of the formal decision process will ultimately lead to
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improved after-tax cash flow.
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R1-2 Expansion can be achieved in new geographic areas through direct selling, or by
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establishing a formal presence in the new territory with a branch office or a separate
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corporation. The new territories may also cross provincial or international boundaries.
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Provincial income tax rates vary amongst the provinces. The amount of income that is
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subject to tax in the new province will be different for each of the three alternatives
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mentioned above. For example, with direct selling, none of the income is taxed in the
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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
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the decision and must be included in any cost-benefit analysis that compares the three
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alternatives [Reg. 400-402.1].
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R1-3 A basic understanding of the following variables will significantly strengthen a decision
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maker's ability to apply tax issues to their area of responsibility.
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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
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divestitures, or debt and equity restructuring, will impact the amount and timing of the tax
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cost. Therefore, cash flow exists only on an after tax basis, and, the tax impacts
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whether or not the ultimate result of the decision is successful. An after-tax approach to
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decision- making requires each decision-maker to think "after-tax" for every decision at
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the time the decision is being made, and, to consider alternative courses of action to
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minimize the tax cost, in the same way that decisions are made regarding other types of
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costs.kr kr




Failure to apply an after-tax approach at the time that decisions are made may
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provide inaccurate information for evaluation, and, result in a permanently inefficient tax
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structure.
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Instructor Solutions Manual Chapter One
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