, Buckwold,MKitunen,MRomanMandMIqbal,MCanadianMIncomeMTaxation,M2023-
2024MEd.
CHAPTER 1 M
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
M M M M M M
ReviewMQuestions
1. IfMincomeMtaxMisMimposedMafterMprofitsMhaveMbeenMdetermined,MwhyMisMtaxationMrelevantMt
oMbusinessMdecisionMmaking?
2. MostMbusinessMdecisionsMinvolveMtheMevaluationMofMalternativeMcoursesMofMaction.MForMex
ample,MaMmarketingMmanagerMmayMbeMresponsibleMforMchoosingMaMstrategyMforMestablishi
ngMsalesMinMnewMgeographicalMterritories.MBrieflyMexplainMhowMtheMtaxMfactorMcanMbeManMint
egralMpartMofMthisMdecision.
3. WhatMareMtheMfundamentalMvariablesMofMtheMincomeMtaxMsystemMthatMdecision-
makersMshouldMbeMfamiliarMwithMsoMthatMtheyMcanMapplyMtaxMissuesMtoMtheirMareasMofMresp
onsibility?
4. WhatMisManM“after-tax”MapproachMtoMdecisionMmaking?
InstructorMSolutionsMManualMChapterMO
ne
, Buckwold,MKitunen,MRomanMandMIqbal,MCanadianMIncomeMTaxation,M2023-
2024MEd.
CopyrightM©M2023MMcGrawMHillMLtd. 1
InstructorMSolutionsMManualMChapterMO
ne
, Buckwold,MKitunen,MRomanMandMIqbal,MCanadianMIncomeMTaxation,M2023-
2024MEd.
CHAPTER 1 M
SolutionsMtoMReviewMQuestions
R1-
1MOnceMprofitMisMdetermined,MtheMIncomeMTaxMActMdeterminesMtheMamountMofMincomeMtaxM
thatMresults.MHowever,MatMallMlevelsMofMmanagement,MalternativeMcoursesMofMactionMareMev
aluated.MInMmanyMcases,MtheMchoiceMofMoneMalternativeMoverMtheMotherMmayMaffectMbothMtheM
amountMandMtheMtimingMofMfutureMtaxesMonMincomeMgeneratedMfromMthatMactivity.MTherefore
,MtheMpersonMmakingMthoseMdecisionsMhasMaMdirectMinputMintoMfutureMafter-
taxMcashMflow.MObviously,MdecisionsMthatMreduceMorMpostponeMtheMpaymentMofMtaxMaffectMt
heMultimateMreturnMonMinvestmentMand,MinMturn,MtheMvalueMofMtheMenterprise.MIncludingMtheMt
axMvariableMasMaMpartMofMtheMformalMdecisionMprocessMwillMultimatelyMleadMtoMimprovedMafte
r-taxMcashMflow.
R1-
2MExpansionMcanMbeMachievedMinMnewMgeographicMareasMthroughMdirectMselling,MorMbyMest
ablishingMaMformalMpresenceMinMtheMnewMterritoryMwithMaMbranchMofficeMorMaMseparateMcorp
oration.MTheMnewMterritoriesMmayMalsoMcrossMprovincialMorMinternationalMboundaries.MProvi
ncialMincomeMtaxMratesMvaryMamongstMtheMprovinces.MTheMamountMofMincomeMthatMisMsubje
ctMtoMtaxMinMtheMnewMprovinceMwillMbeMdifferentMforMeachMofMtheMthreeMalternativesMmention
edMabove.MForMexample,MwithMdirectMselling,MnoneMofMtheMincomeMisMtaxedMinMtheMnewMprovi
nce,MbutMwithMaMseparateMcorporation,MallMofMtheMincomeMisMtaxedMinMtheMnewMprovince.MBe
causeMtheMtaxMcostMisMdifferentMinMeachMcase,MtaxationMisMaMrelevantMpartMofMtheMdecisionMan
dMmustMbeMincludedMinManyMcost-
benefitManalysisMthatMcomparesMtheMthreeMalternativesM[Reg.M400-402.1].
R1-
3M AM basicM understandingM ofM theM followingM variablesM willM significantlyM strengthenM aM decisio
nMmaker'sMabilityMtoMapplyMtaxMissuesMtoMtheirMareaMofMresponsibility.
TypesMofMIncome -
Employment,MBusiness,MProperty,MCapitalMgainsMT
axableMEntities - Individuals,MCorporations,MTrusts
AlternativeMBusiness -
Corporation,MProprietorship,MPartnership,MLimitedMSt
ructures partnership,MJointMarrangement,MIncomeMtrust
TaxMJurisdictions - Federal,MProvincial,MForeign
R1-
4MAllMcashMflowMdecisions,MwhetherMrelatedMtoMrevenues,Mexpenses,MassetMacquisitionsMorM
divestitures,MorMdebtMandMequityMrestructuring,MwillMimpactMtheMamountMandMtimingMofMtheMt
axMcost.MTherefore,McashMflowMexistsMonlyMonManMafterMtaxMbasis,Mand,MtheMtaxMimpactsMwhe
therMorMnotMtheMultimateMresultMofMtheMdecisionMisMsuccessful.MAnMafter-
taxMapproachMtoMdecision-makingMrequiresMeachMdecision-makerMtoMthinkM"after-
tax"MforMeveryMdecisionMatMtheMtimeMtheMdecisionMisMbeingMmade,Mand,MtoMconsiderMalternati
veMcoursesMofMactionMtoMminimizeMtheMtaxMcost,MinMtheMsameMwayMthatMdecisionsMareMmade
MregardingMotherMtypesMofMcosts.
FailureM toM applyM anM after-
InstructorMSolutionsMManualMChapterMO
ne
2024MEd.
CHAPTER 1 M
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
M M M M M M
ReviewMQuestions
1. IfMincomeMtaxMisMimposedMafterMprofitsMhaveMbeenMdetermined,MwhyMisMtaxationMrelevantMt
oMbusinessMdecisionMmaking?
2. MostMbusinessMdecisionsMinvolveMtheMevaluationMofMalternativeMcoursesMofMaction.MForMex
ample,MaMmarketingMmanagerMmayMbeMresponsibleMforMchoosingMaMstrategyMforMestablishi
ngMsalesMinMnewMgeographicalMterritories.MBrieflyMexplainMhowMtheMtaxMfactorMcanMbeManMint
egralMpartMofMthisMdecision.
3. WhatMareMtheMfundamentalMvariablesMofMtheMincomeMtaxMsystemMthatMdecision-
makersMshouldMbeMfamiliarMwithMsoMthatMtheyMcanMapplyMtaxMissuesMtoMtheirMareasMofMresp
onsibility?
4. WhatMisManM“after-tax”MapproachMtoMdecisionMmaking?
InstructorMSolutionsMManualMChapterMO
ne
, Buckwold,MKitunen,MRomanMandMIqbal,MCanadianMIncomeMTaxation,M2023-
2024MEd.
CopyrightM©M2023MMcGrawMHillMLtd. 1
InstructorMSolutionsMManualMChapterMO
ne
, Buckwold,MKitunen,MRomanMandMIqbal,MCanadianMIncomeMTaxation,M2023-
2024MEd.
CHAPTER 1 M
SolutionsMtoMReviewMQuestions
R1-
1MOnceMprofitMisMdetermined,MtheMIncomeMTaxMActMdeterminesMtheMamountMofMincomeMtaxM
thatMresults.MHowever,MatMallMlevelsMofMmanagement,MalternativeMcoursesMofMactionMareMev
aluated.MInMmanyMcases,MtheMchoiceMofMoneMalternativeMoverMtheMotherMmayMaffectMbothMtheM
amountMandMtheMtimingMofMfutureMtaxesMonMincomeMgeneratedMfromMthatMactivity.MTherefore
,MtheMpersonMmakingMthoseMdecisionsMhasMaMdirectMinputMintoMfutureMafter-
taxMcashMflow.MObviously,MdecisionsMthatMreduceMorMpostponeMtheMpaymentMofMtaxMaffectMt
heMultimateMreturnMonMinvestmentMand,MinMturn,MtheMvalueMofMtheMenterprise.MIncludingMtheMt
axMvariableMasMaMpartMofMtheMformalMdecisionMprocessMwillMultimatelyMleadMtoMimprovedMafte
r-taxMcashMflow.
R1-
2MExpansionMcanMbeMachievedMinMnewMgeographicMareasMthroughMdirectMselling,MorMbyMest
ablishingMaMformalMpresenceMinMtheMnewMterritoryMwithMaMbranchMofficeMorMaMseparateMcorp
oration.MTheMnewMterritoriesMmayMalsoMcrossMprovincialMorMinternationalMboundaries.MProvi
ncialMincomeMtaxMratesMvaryMamongstMtheMprovinces.MTheMamountMofMincomeMthatMisMsubje
ctMtoMtaxMinMtheMnewMprovinceMwillMbeMdifferentMforMeachMofMtheMthreeMalternativesMmention
edMabove.MForMexample,MwithMdirectMselling,MnoneMofMtheMincomeMisMtaxedMinMtheMnewMprovi
nce,MbutMwithMaMseparateMcorporation,MallMofMtheMincomeMisMtaxedMinMtheMnewMprovince.MBe
causeMtheMtaxMcostMisMdifferentMinMeachMcase,MtaxationMisMaMrelevantMpartMofMtheMdecisionMan
dMmustMbeMincludedMinManyMcost-
benefitManalysisMthatMcomparesMtheMthreeMalternativesM[Reg.M400-402.1].
R1-
3M AM basicM understandingM ofM theM followingM variablesM willM significantlyM strengthenM aM decisio
nMmaker'sMabilityMtoMapplyMtaxMissuesMtoMtheirMareaMofMresponsibility.
TypesMofMIncome -
Employment,MBusiness,MProperty,MCapitalMgainsMT
axableMEntities - Individuals,MCorporations,MTrusts
AlternativeMBusiness -
Corporation,MProprietorship,MPartnership,MLimitedMSt
ructures partnership,MJointMarrangement,MIncomeMtrust
TaxMJurisdictions - Federal,MProvincial,MForeign
R1-
4MAllMcashMflowMdecisions,MwhetherMrelatedMtoMrevenues,Mexpenses,MassetMacquisitionsMorM
divestitures,MorMdebtMandMequityMrestructuring,MwillMimpactMtheMamountMandMtimingMofMtheMt
axMcost.MTherefore,McashMflowMexistsMonlyMonManMafterMtaxMbasis,Mand,MtheMtaxMimpactsMwhe
therMorMnotMtheMultimateMresultMofMtheMdecisionMisMsuccessful.MAnMafter-
taxMapproachMtoMdecision-makingMrequiresMeachMdecision-makerMtoMthinkM"after-
tax"MforMeveryMdecisionMatMtheMtimeMtheMdecisionMisMbeingMmade,Mand,MtoMconsiderMalternati
veMcoursesMofMactionMtoMminimizeMtheMtaxMcost,MinMtheMsameMwayMthatMdecisionsMareMmade
MregardingMotherMtypesMofMcosts.
FailureM toM applyM anM after-
InstructorMSolutionsMManualMChapterMO
ne
