, SOLUTION MANUAL
Canadian Income Taxation 26th Edition
by William Buckwold, All Chapters 1 – 23
,TABLE OF CONTENTS
a a
Chapter1 Taxation-Its Role in Decision Making
Chapter2 Fundamentals of Tax Planning
Chapter 3 Liability foraTax, Income Determination, and Administration of the Income Tax System
Chapter 4 Income from Employment
Chapter 5 Income from Business
Chapter 6 The Acquisition, Use, and Disposal of Depreciable Property
Chapter7 Income fromaProperty
Chapter8 Gains and Losses on the Disposition of Capital Property-Capital Gains
Chapter 9 Other Income, Other Deductions, and Special Rules foraCompleting Net Income for Tax Purposes
Chapter 10 Individuals: Determination of Taxable Income and Taxes Payable
Chapter 11 Corporations-An Introduction
Chapter 12 Organization, Capital Structures, and Income Distributions of Corporations
Chapter 13 The Canadian-Controlled Private Corporation
Chapter 14 Multiple Corporations and Their Reorganization
Chapter 15 Partnerships
Chapter 16 Limited Partnerships and Joint Ventures
Chapter 17 Trusts
Chapter 18 Business Acquisitions and Divestitures-Assets versus Shares
Chapter 19 Business Acquisitions and Divestitures-Tax-Deferred Sales
Chapter 20 Domestic and International Business Expansion
Chapter 21 Tax Aspects of Corporate Financing
Chapter 22 Introduction to GST/HST
Chapter 23 Business Valuations
, CHAPTER 1
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
Review Questions
1. If income tax is imposed afteraprofits have been determined, why is taxation relevant to business d
ecision making?
2. Mostabusiness decisions involve the evaluation of alternative courses of action. For example, a ma
rketing manager may be responsible for choosing a strategyafor establishing sales in newageograp
hical territories. Briefly explain how the tax factor can be an integral part of this decision.
3. What are the fundamental variables of the income tax system that decision-
makers should be familiar with so that they can apply tax issues to their areas of responsibility?
4. What is an ―after-tax‖ approach to decision making?
Solutions to Review Questions
R1-
1 Once profit is determined, the Income Tax Act determines the amount of income tax that results.
However, at all levels of management, alternative courses of action are evaluated.In many cases, th
e choice of one alternative over the other may affect both the amount and the timing of future taxes
on incomeagenerated from that activity. Therefore, the person making those decisions has a direct i
nput into future after-
tax cash flow. Obviously, decisions that reduce or postpone the payment of tax affect the ultimate r
eturn on investment and, in turn, the value of the enterprise. Includingathe tax variable as a part of t
he formal decision process will ultimately lead to improved after-tax cash flow.
R1-
2 Expansion can be achieved in new geographic areas through direct selling, or by establishing a fo
rmal presence in the new territory with a branch office oraa separate corporation. The new territorie
s may also cross provincial or international boundaries. Provincial income tax rates vary amongst t
he provinces. The amount of income that is subject to tax in the new province will be different for e
ach of the three alternatives mentioned above. For example, with direct selling, none of the income
is taxed in the newaprovince, but withaa separate corporation, all of the income is taxed in the new p
rovince. Because the tax cost is different in each case, taxation is a relevant part of the decision and
must be included in any cost-benefit analysis that compares the three alternatives [Reg. 400-
402.1].
R1-
3 A basic understanding of the following variables will significantly strengthen a decision maker's
ability to apply tax issues to theiraarea of responsibility.
Types of Income - Employment, Business, Property, Capital gains
Taxable Entities - Individuals, Corporations, Trusts
Canadian Income Taxation 26th Edition
by William Buckwold, All Chapters 1 – 23
,TABLE OF CONTENTS
a a
Chapter1 Taxation-Its Role in Decision Making
Chapter2 Fundamentals of Tax Planning
Chapter 3 Liability foraTax, Income Determination, and Administration of the Income Tax System
Chapter 4 Income from Employment
Chapter 5 Income from Business
Chapter 6 The Acquisition, Use, and Disposal of Depreciable Property
Chapter7 Income fromaProperty
Chapter8 Gains and Losses on the Disposition of Capital Property-Capital Gains
Chapter 9 Other Income, Other Deductions, and Special Rules foraCompleting Net Income for Tax Purposes
Chapter 10 Individuals: Determination of Taxable Income and Taxes Payable
Chapter 11 Corporations-An Introduction
Chapter 12 Organization, Capital Structures, and Income Distributions of Corporations
Chapter 13 The Canadian-Controlled Private Corporation
Chapter 14 Multiple Corporations and Their Reorganization
Chapter 15 Partnerships
Chapter 16 Limited Partnerships and Joint Ventures
Chapter 17 Trusts
Chapter 18 Business Acquisitions and Divestitures-Assets versus Shares
Chapter 19 Business Acquisitions and Divestitures-Tax-Deferred Sales
Chapter 20 Domestic and International Business Expansion
Chapter 21 Tax Aspects of Corporate Financing
Chapter 22 Introduction to GST/HST
Chapter 23 Business Valuations
, CHAPTER 1
TAXATION― ITS ROLE IN BUSINESS DECISION MAKING
Review Questions
1. If income tax is imposed afteraprofits have been determined, why is taxation relevant to business d
ecision making?
2. Mostabusiness decisions involve the evaluation of alternative courses of action. For example, a ma
rketing manager may be responsible for choosing a strategyafor establishing sales in newageograp
hical territories. Briefly explain how the tax factor can be an integral part of this decision.
3. What are the fundamental variables of the income tax system that decision-
makers should be familiar with so that they can apply tax issues to their areas of responsibility?
4. What is an ―after-tax‖ approach to decision making?
Solutions to Review Questions
R1-
1 Once profit is determined, the Income Tax Act determines the amount of income tax that results.
However, at all levels of management, alternative courses of action are evaluated.In many cases, th
e choice of one alternative over the other may affect both the amount and the timing of future taxes
on incomeagenerated from that activity. Therefore, the person making those decisions has a direct i
nput into future after-
tax cash flow. Obviously, decisions that reduce or postpone the payment of tax affect the ultimate r
eturn on investment and, in turn, the value of the enterprise. Includingathe tax variable as a part of t
he formal decision process will ultimately lead to improved after-tax cash flow.
R1-
2 Expansion can be achieved in new geographic areas through direct selling, or by establishing a fo
rmal presence in the new territory with a branch office oraa separate corporation. The new territorie
s may also cross provincial or international boundaries. Provincial income tax rates vary amongst t
he provinces. The amount of income that is subject to tax in the new province will be different for e
ach of the three alternatives mentioned above. For example, with direct selling, none of the income
is taxed in the newaprovince, but withaa separate corporation, all of the income is taxed in the new p
rovince. Because the tax cost is different in each case, taxation is a relevant part of the decision and
must be included in any cost-benefit analysis that compares the three alternatives [Reg. 400-
402.1].
R1-
3 A basic understanding of the following variables will significantly strengthen a decision maker's
ability to apply tax issues to theiraarea of responsibility.
Types of Income - Employment, Business, Property, Capital gains
Taxable Entities - Individuals, Corporations, Trusts
