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TEST BANK for Canadian Income Taxation Planning and Decision Making, 25th Edition by William Buckwold, Joan Kitunen, Matthew Roman, Abraham Iqbal

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TEST BANK for Canadian Income Taxation Planning and Decision Making, 25th Edition by William Buckwold, Joan Kitunen, Matthew Roman, Abraham Iqbal CHAPTER 1 1) Which of the following is not considered to be a separate entity for tax purposes in Canada? A) An individual B) A proprietorship C) A corporation D) A trust 2) Which of the following attitudes and actions is most likely to help decision-makers develop an efficient approach to taxation? A) Cash flows should be considered from a before-tax perspective when making decisions. B) Functional managers should not be held responsible for the tax effects of decisions within their divisions. C) Tax costs to a business should be regarded as controllable expenses, much like product costs and selling costs. D) All managers should own a copy of the Income Tax Act. 3) Which of the following statements is true? A) Dividends paid by a corporation are deductible by that corporation and are a form of property income for the recipient. B) Dividends paid by a corporation are deductible by that corporation and are a form of business income for the recipient. C) Dividends paid by a corporation are not deductible by that corporation and are a form of business income for the recipient. D) Dividends paid by a corporation are not deductible by that corporation and are a form of property income for the recipient. Version 1 1 4) When assessing the value of a corporation, the most relevant information that decisionmakers normally consider is A) the potential for before-tax profits. B) the potential for after-tax profits. C) the current corporate tax rate. D) cash flow before-tax. 5) Income tax is calculated for which of the following jurisdictional groups? A) Municipal, provincial, and federal B) Municipal, federal, and foreign C) Provincial, federal, and foreign D) Municipal, provincial, and foreign 6) Two investor corporations may not enter jointly into which of the following? A) Joint venture B) Partnership C) Separate corporation D) Proprietorship 7) Which of the following statements is true? Version 1 2 A) Cash flow should never be calculated on an after-tax basis. B) The tax cost to a business should be regarded as a cost of doing business. C) Income tax cannot be treated as a controllable cost. D) The value of an enterprise should be based on pre-tax cash flow. 8) Logan holds a 7% interest-bearing debt instrument in Glow Co. Glow Co.'s tax rate is 27%, and Logan is in a 45% tax bracket. Which of the following statements is correct? A) The after-tax cost of the debt instrument is 5.11% to Glow Co., and the after-tax value to Logan is 3.85%. B) The after-tax cost of the debt instrument is 5.11% to Glow Co., and the after-tax value to Logan is 3.15%. C) The after-tax cost of the debt instrument is 1.89% to Glow Co., and the after-tax value to Logan is 3.15%. D) The after-tax cost of the debt instrument is 7% to Glow Co., and the after-tax value to Logan is 7%. 9) Which of the following lists accurately names the five general income categories for tax purposes? A) Business, Interest, Employment, Capital Gains, Other B) Business, Property, Employment, Capital Gains, Foreign C) Business, Property, Employment, Capital Gains, Other D) Business, Property, Employment, Investments, Other 10) Proprietorships, corporations, partnerships, limited partnerships, joint ventures, and income trusts are all Version 1 3 CONTACT US ON A) categories of income for tax purposes. B) tax jurisdictions. C) examples of financial instruments. D) forms of business. 11) Which of the following statements regarding taxation within jurisdictions in Canada is true? A) Federal and provincial or territorial tax brackets are always identical to one another. B) Only federal taxes apply to individuals while both federal and provincial or territorial taxes apply to corporations. C) Both federal and provincial or territorial taxes apply to Canadian taxpayers. D) Only federal taxes apply to corporations while both federal and provincial taxes apply to individuals. 12) Jamie is an employee at ABC Ltd. and is in a 45% tax bracket. ABC Ltd. has a tax rate of 27%. The company has offered Jamie a 10% pay raise. Jamie's current salary is $50,000. What is after-tax cost of the raise to ABC Ltd.? A) $1,350 B) $2,750 C) $2,858 D) $3,650 13) Simone is an employee at XYZ Ltd. and is in a 45% tax bracket. XYZ Ltd. has a tax rate of 27%. The company has offered Simone a 10% pay raise. Simone's current salary is $50,000. What is after-tax value of the raise to Simone? Version 1 4 A) $1,350 B) $2,250 C) $2,750 D) $5,000 14) All cash flow must be considered on an after-tax basis because A) companies want a positive cash flow. B) the value to a business must be considered. C) the investor's tax rate is irrelevant. D) decisions that appear favourable on a pre-tax basis may be unfavorable or marginally favourable on an after- tax basis. 15) Which of the following is not a separate entity for tax purposes? A) Corporation B) Trust C) Partnership D) Individual 16) The Canadian income tax system for individuals is considered A) progressive. B) regressive. C) flat. D) unfair. Version 1 5 17) What is the most significant form of taxation that affects return on investment? A) Property Taxes B) Excise Taxes C) Income Taxes D) All taxes 18) QWERTY Co. decides to give a 6% raise to its employee Jean, who is currently in the 40% tax bracket. The company is in the 27% tax bracket. What is the after-tax implication for each of the parties in this transaction? 3.6%. A) The company has a net after-tax cost of 4.38% and Jean has an after-tax income of B) Both Jean and the company have a 3% after-tax cost/benefit. C) We should only consider the pre-tax amount of 6% to each party. D) Both the company and Jean have an after-tax cost of 4.38%. 19) Explain what is meant by the statement that

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Institution
Canadian Income Taxation Planning An
Course
Canadian Income Taxation Planning an

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,CHAPTER 1 YYY




1) Which of the following is not considered to be a separate entity for tax
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




purposes in Canada?
YYY YYY YYY




A) An individual YYY




B) A proprietorship
YYY




C) A corporation YYY




D) A trust YYY




2) Which of the following attitudes and actions is most likely to help
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




decision-makers develop an efficient approach to taxation?
YYY YYY YYY YYY YYY YYY YYY




A) Cash flows should be considered from a before-tax perspective when
YYY YYY YYY YYY YYY YYY YYY YYY YYY




making decisions.
YYY YYY




B) Functional managers should not be held responsible for the tax effects of
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




decisions within their divisions.
YYY YYY YYY YYY




C) Tax costs to a business should be regarded as controllable expenses,
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




much like product costs and selling costs.
YYY YYY YYY YYY YYY YYY YYY




D) All managers should own a copy of the Income Tax Act.
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




3) Which of the following statements is true?
YYY YYY YYY YYY YYY YYY




A) Dividends paid by a corporation are deductible by that corporation and are
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




a form of property income for the recipient.
YYY YYY YYY YYY YYY YYY YYY YYY




B) Dividends paid by a corporation are deductible by that corporation and are
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




a form of business income for the recipient.
YYY YYY YYY YYY YYY YYY YYY YYY




C) Dividends paid by a corporation are not deductible by that corporation and
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




are a form of business income for the recipient.
YYY YYY YYY YYY YYY YYY YYY YYY YYY




D) Dividends paid by a corporation are not deductible by that corporation and
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




are a form of property income for the recipient.
YYY YYY YYY YYY YYY YYY YYY YYY YYY




1

,4) When assessing the value of a corporation, the most relevant information that
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




decision- makers normally consider is
YYY YYY YYY YYY YYY




A) the potential for before-tax profits.
YYY YYY YYY YYY




B) the potential for after-tax profits.
YYY YYY YYY YYY




C) the current corporate tax rate.
YYY YYY YYY YYY




D) cash flow before-tax.
YYY YYY




5) Two investor corporations may not enter jointly into which of the following?
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




A) Joint venture YYY




B) Partnership
C) Separate corporation YYY




D) Proprietorship




6) Income tax is calculated for which of the following jurisdictional groups?
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




A) Municipal, YYY provincial, and federal YYY YYY




B) Municipal, YYY federal, and foreignYYY YYY




C) Provincial, YYY federal, and foreignYYY YYY




D) Municipal, YYY provincial, and foreign YYY YYY




7) Which of the following statements is true?
YYY YYY YYY YYY YYY YYY




2

, A) Cash flow should never be calculated on an after-tax basis.
YYY YYY YYY YYY YYY YYY YYY YYY YYY




B) The tax cost to a business should be regarded as a cost of doing business.
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




C) Income tax cannot be treated as a controllable cost.
YYY YYY YYY YYY YYY YYY YYY YYY




D) The value of an enterprise should be based on pre-tax cash flow.
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




8) Logan holds a 7% interest-bearing debt instrument in Glow Co. Glow Co.'s
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




tax rate is 27%, and Logan is in a 45% tax bracket. Which of the following
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




statements is correct?
YYY YYY YYY




A) The after-tax cost of the debt
YYY YYY YYY YYY YYY YYY instrument is 5.11% to Glow Co., and the
YYY YYY YYY YYY YYY YYY YYY




after-tax value to Logan is 3.85%.
YYY YYY YYY YYY YYY YYY




B) The after-tax cost of the debt
YYY YYY YYY YYY YYY instrument is 5.11% to Glow Co., and the
YYY YYY YYY YYY YYY YYY YYY YYY




after-tax value to Logan is 3.15%.
YYY YYY YYY YYY YYY YYY




C) The after-tax cost of the debt
YYY YYY YYY YYY YYY instrument is 1.89% to Glow Co., and the
YYY YYY YYY YYY YYY YYY YYY YYY




after-tax value to Logan is 3.15%.
YYY YYY YYY YYY YYY YYY




D) The after-tax cost of the debt
YYY YYY YYY YYY YYY YYY instrument is 7% to Glow Co., and the after-
YYY YYY YYY YYY YYY YYY YYY YYY




tax value to Logan is 7%.
YYY YYY YYY YYY YYY




9) Which of the following lists accurately names the five general income
YYY YYY YYY YYY YYY YYY YYY YYY YYY YYY




categories for tax purposes?
YYY YYY YYY YYY




A) Business, Interest, Employment, Capital Gains, Other
YYY YYY YYY YYY YYY




B) Business, YYY Property, Employment, Capital Gains, Foreign
YYY YYY YYY YYY




C) Business, YYY Property, Employment, Capital Gains, Other
YYY YYY YYY YYY




D) Business, Property, Employment, Investments, Other
YYY YYY YYY YYY




10) Proprietorships, corporations, partnerships, limited partnerships, joint ventures,
YYY YYY YYY YYY YYY YYY




and income trusts are all
YYY YYY YYY YYY YYY




3
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Institution
Canadian Income Taxation Planning an
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Canadian Income Taxation Planning an

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