,Solution manual for
D D
Canadian Income
D D
Taxation 20222023 25th
D D D
Edition by William
D D D
Buckwold, Joan Kitunen,
D D D
Matthew Roman
D D
,CHAPTER 1 D
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
D D D D D D
Review DQuestions
1. If Dincome Dtax Dis Dimposed Dafter Dprofits Dhave Dbeen Ddetermined, Dwhy Dis Dtaxation Drelevant
Dto Dbusiness Ddecision Dmaking?
2. Most Dbusiness Ddecisions Dinvolve Dthe Devaluation Dof Dalternative Dcourses Dof Daction. DFor
Dexample, Da Dmarketing Dmanager Dmay Dbe Dresponsible Dfor Dchoosing Da Dstrategy D for
Destablishing D sales D in D new D geographical D territories. D Briefly D explain D how D the D tax
D factor D can Dbe Dan Dintegral Dpart Dof Dthis Ddecision.
3. What Dare Dthe Dfundamental Dvariables Dof Dthe Dincome Dtax Dsystem D that D decision-makers
D should Dbe Dfamiliar Dwith Dso Dthat Dthey Dcan Dapply Dtax Dissues Dto Dtheir Dareas Dof
Dresponsibility?
4. What Dis Dan D―after-tax‖ Dapproach Dto Ddecision Dmaking?
1
, Solutions Dto DReview DQuestions
R1-1 DOnce Dprofit Dis Ddetermined, Dthe DIncome DTax DAct Ddetermines Dthe Damount Dof Dincome Dtax
Dthat Dresults. DHowever, Dat Dall Dlevels Dof Dmanagement, Dalternative Dcourses Dof Daction Dare
Devaluated. DIn D many D cases, D the D choice D of D one D alternative D over D the D other D may
D affect D both D the D amount Dand Dthe Dtiming Dof D future Dtaxes D on Dincome Dgenerated Dfrom
Dthat D activity. DTherefore, Dthe D person D making D those D decisions D has D a D direct D input
D into D future D after-tax D cash D flow. DObviously, Ddecisions Dthat Dreduce Dor Dpostpone Dthe
Dpayment Dof Dtax Daffect Dthe Dultimate Dreturn Don D investment D and, Din Dturn, Dthe Dvalue Dof Dthe
Denterprise. DIncluding D the Dtax Dvariable Das Da Dpart D of Dthe Dformal Ddecision Dprocess Dwill
Dultimately Dlead Dto Dimproved Dafter-tax Dcash Dflow.
R1-2 DExpansion Dcan Dbe Dachieved Din Dnew Dgeographic Dareas Dthrough Ddirect Dselling, Dor Dby
Destablishing Da Dformal Dpresence Din Dthe Dnew Dterritory Dwith Da Dbranch Doffice Dor Da Dseparate
Dcorporation. DThe Dnew Dterritories Dmay Dalso Dcross Dprovincial Dor Dinternational Dboundaries.
DProvincial Dincome Dtax Drates Dvary Damongst Dthe Dprovinces. DThe Damount Dof Dincome Dthat Dis
Dsubject Dto Dtax Din Dthe Dnew Dprovince Dwill Dbe Ddifferent Dfor Deach Dof Dthe Dthree Dalternatives
Dmentioned Dabove. DFor Dexample, Dwith Ddirect Dselling, Dnone Dof Dthe Dincome Dis Dtaxed Din Dthe
Dnew Dprovince, Dbut Dwith Da Dseparate Dcorporation, Dall Dof Dthe Dincome Dis Dtaxed Din Dthe Dnew
Dprovince. DBecause Dthe Dtax Dcost Dis D different Din Deach Dcase, Dtaxation D is Da Drelevant Dpart
Dof Dthe Ddecision D and Dmust Dbe Dincluded Din Dany Dcost-benefit Danalysis Dthat Dcompares Dthe
D three Dalternatives D[Reg. D400-402.1].
R1-3 DA Dbasic Dunderstanding Dof Dthe Dfollowing Dvariables Dwill Dsignificantly Dstrengthen Da Ddecision
Dmaker's Dability Dto Dapply Dtax Dissues Dto Dtheir Darea Dof Dresponsibility.
Types Dof DIncome - Employment, DBusiness, DProperty, DCapital
Dgains DTaxable DEntities - Individuals, DCorporations, DTrusts
Alternative DBusiness - Corporation, DProprietorship, DPartnership, DLimited
Structures partnership, DJoint Darrangement, DIncome Dtrust
DTax DJurisdictions - D Federal, DProvincial, DForeign
R1-4 DAll Dcash Dflow Ddecisions, Dwhether Drelated Dto Drevenues, Dexpenses, Dasset Dacquisitions Dor
Ddivestitures, Dor Ddebt Dand Dequity Drestructuring, Dwill Dimpact Dthe Damount Dand Dtiming Dof Dthe
Dtax Dcost. D Therefore, D cash D flow D exists D only D on D an D after D tax D basis, D and, D the D tax
D impacts D whether Dor Dnot Dthe Dultimate Dresult Dof Dthe Ddecision Dis Dsuccessful. DAn Dafter-tax
Dapproach Dto Ddecision- Dmaking Drequires Deach Ddecision-maker Dto Dthink D"after-tax" Dfor
Devery Ddecision Dat Dthe Dtime Dthe Ddecision Dis Dbeing Dmade, Dand, Dto Dconsider Dalternative
Dcourses Dof Daction Dto Dminimize Dthe Dtax Dcost, Din Dthe Dsame Dway Dthat Ddecisions Dare Dmade
Dregarding Dother Dtypes Dof Dcosts.
Failure Dto Dapply Dan Dafter-tax Dapproach Dat Dthe Dtime Dthat Ddecisions Dare Dmade Dmay Dprovide
D inaccurate Dinformation Dfor Devaluation, Dand, Dresult Din Da Dpermanently Dinefficient Dtax Dstructure.
2
D D
Canadian Income
D D
Taxation 20222023 25th
D D D
Edition by William
D D D
Buckwold, Joan Kitunen,
D D D
Matthew Roman
D D
,CHAPTER 1 D
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
D D D D D D
Review DQuestions
1. If Dincome Dtax Dis Dimposed Dafter Dprofits Dhave Dbeen Ddetermined, Dwhy Dis Dtaxation Drelevant
Dto Dbusiness Ddecision Dmaking?
2. Most Dbusiness Ddecisions Dinvolve Dthe Devaluation Dof Dalternative Dcourses Dof Daction. DFor
Dexample, Da Dmarketing Dmanager Dmay Dbe Dresponsible Dfor Dchoosing Da Dstrategy D for
Destablishing D sales D in D new D geographical D territories. D Briefly D explain D how D the D tax
D factor D can Dbe Dan Dintegral Dpart Dof Dthis Ddecision.
3. What Dare Dthe Dfundamental Dvariables Dof Dthe Dincome Dtax Dsystem D that D decision-makers
D should Dbe Dfamiliar Dwith Dso Dthat Dthey Dcan Dapply Dtax Dissues Dto Dtheir Dareas Dof
Dresponsibility?
4. What Dis Dan D―after-tax‖ Dapproach Dto Ddecision Dmaking?
1
, Solutions Dto DReview DQuestions
R1-1 DOnce Dprofit Dis Ddetermined, Dthe DIncome DTax DAct Ddetermines Dthe Damount Dof Dincome Dtax
Dthat Dresults. DHowever, Dat Dall Dlevels Dof Dmanagement, Dalternative Dcourses Dof Daction Dare
Devaluated. DIn D many D cases, D the D choice D of D one D alternative D over D the D other D may
D affect D both D the D amount Dand Dthe Dtiming Dof D future Dtaxes D on Dincome Dgenerated Dfrom
Dthat D activity. DTherefore, Dthe D person D making D those D decisions D has D a D direct D input
D into D future D after-tax D cash D flow. DObviously, Ddecisions Dthat Dreduce Dor Dpostpone Dthe
Dpayment Dof Dtax Daffect Dthe Dultimate Dreturn Don D investment D and, Din Dturn, Dthe Dvalue Dof Dthe
Denterprise. DIncluding D the Dtax Dvariable Das Da Dpart D of Dthe Dformal Ddecision Dprocess Dwill
Dultimately Dlead Dto Dimproved Dafter-tax Dcash Dflow.
R1-2 DExpansion Dcan Dbe Dachieved Din Dnew Dgeographic Dareas Dthrough Ddirect Dselling, Dor Dby
Destablishing Da Dformal Dpresence Din Dthe Dnew Dterritory Dwith Da Dbranch Doffice Dor Da Dseparate
Dcorporation. DThe Dnew Dterritories Dmay Dalso Dcross Dprovincial Dor Dinternational Dboundaries.
DProvincial Dincome Dtax Drates Dvary Damongst Dthe Dprovinces. DThe Damount Dof Dincome Dthat Dis
Dsubject Dto Dtax Din Dthe Dnew Dprovince Dwill Dbe Ddifferent Dfor Deach Dof Dthe Dthree Dalternatives
Dmentioned Dabove. DFor Dexample, Dwith Ddirect Dselling, Dnone Dof Dthe Dincome Dis Dtaxed Din Dthe
Dnew Dprovince, Dbut Dwith Da Dseparate Dcorporation, Dall Dof Dthe Dincome Dis Dtaxed Din Dthe Dnew
Dprovince. DBecause Dthe Dtax Dcost Dis D different Din Deach Dcase, Dtaxation D is Da Drelevant Dpart
Dof Dthe Ddecision D and Dmust Dbe Dincluded Din Dany Dcost-benefit Danalysis Dthat Dcompares Dthe
D three Dalternatives D[Reg. D400-402.1].
R1-3 DA Dbasic Dunderstanding Dof Dthe Dfollowing Dvariables Dwill Dsignificantly Dstrengthen Da Ddecision
Dmaker's Dability Dto Dapply Dtax Dissues Dto Dtheir Darea Dof Dresponsibility.
Types Dof DIncome - Employment, DBusiness, DProperty, DCapital
Dgains DTaxable DEntities - Individuals, DCorporations, DTrusts
Alternative DBusiness - Corporation, DProprietorship, DPartnership, DLimited
Structures partnership, DJoint Darrangement, DIncome Dtrust
DTax DJurisdictions - D Federal, DProvincial, DForeign
R1-4 DAll Dcash Dflow Ddecisions, Dwhether Drelated Dto Drevenues, Dexpenses, Dasset Dacquisitions Dor
Ddivestitures, Dor Ddebt Dand Dequity Drestructuring, Dwill Dimpact Dthe Damount Dand Dtiming Dof Dthe
Dtax Dcost. D Therefore, D cash D flow D exists D only D on D an D after D tax D basis, D and, D the D tax
D impacts D whether Dor Dnot Dthe Dultimate Dresult Dof Dthe Ddecision Dis Dsuccessful. DAn Dafter-tax
Dapproach Dto Ddecision- Dmaking Drequires Deach Ddecision-maker Dto Dthink D"after-tax" Dfor
Devery Ddecision Dat Dthe Dtime Dthe Ddecision Dis Dbeing Dmade, Dand, Dto Dconsider Dalternative
Dcourses Dof Daction Dto Dminimize Dthe Dtax Dcost, Din Dthe Dsame Dway Dthat Ddecisions Dare Dmade
Dregarding Dother Dtypes Dof Dcosts.
Failure Dto Dapply Dan Dafter-tax Dapproach Dat Dthe Dtime Dthat Ddecisions Dare Dmade Dmay Dprovide
D inaccurate Dinformation Dfor Devaluation, Dand, Dresult Din Da Dpermanently Dinefficient Dtax Dstructure.
2
