SOLUTION MANUAL
Canadian Income Taxation 26th Edition
by William Buckwold, All Chapters 1 - 23
,TABLE OF CONTENTS
A A
Chapter1ATaxation-ItsARoleAinADecisionAMaking
Chapter2AFundamentalsAofATaxAPlanning
ChapterA3ALiabilityAforATax,AIncomeADetermination,AandAAdministrationAofAtheAIncomeATaxASystem
ChapterA4AIncomeAfromAEmployment
ChapterA5AIncomeAfromABusiness
ChapterA6ATheAAcquisition,AUse,AandADisposalAofADepreciableAProperty
Chapter7AIncomeAfromAProperty
Chapter8AGainsAandALossesAonAtheADispositionAofACapitalAProperty-CapitalAGains
ChapterA9AOtherAIncome,AOtherADeductions,AandASpecialARulesAforACompletingANetAIncomeAforATaxAPurposes
ChapterA10AIndividuals:ADeterminationAofATaxableAIncomeAandATaxesAPayable
ChapterA11ACorporations-AnAIntroduction
ChapterA12AOrganization,ACapitalAStructures,AandAIncomeADistributionsAofACorporations
ChapterA13ATheACanadian-ControlledAPrivateACorporation
ChapterA14AMultipleACorporationsAandATheirAReorganization
ChapterA15APartnerships
ChapterA16ALimitedAPartnershipsAandAJointAVentures
ChapterA17ATrusts
ChapterA18ABusinessAAcquisitionsAandADivestitures-AssetsAversusAShares
ChapterA19ABusinessAAcquisitionsAandADivestitures-Tax-DeferredASales
ChapterA20ADomesticAandAInternationalABusinessAExpansion
ChapterA21ATaxAAspectsAofACorporateAFinancing
ChapterA22AIntroductionAtoAGST/HST
ChapterA23ABusinessAValuations
, CHAPTERA1
TAXATION―AITSAROLEAINABUSINESSADECISIONAMAKING
ReviewAQuestions
1. IfAincomeAtaxAisAimposedAafterAprofitsAhaveAbeenAdetermined,AwhyAisAtaxationArelevantAtoAbusi
nessAdecisionAmaking?
2. MostAbusinessAdecisionsAinvolveAtheAevaluationAofAalternativeAcoursesAofAaction.AForAexample,
AaAmarketingAmanagerAmayAbeAresponsibleAforAchoosingAaAstrategyAforAestablishingAsalesAinAne
wAgeographicalAterritories.ABrieflyAexplainAhowAtheAtaxAfactorAcanAbeAanAintegralApartAofAthisA
decision.
3. WhatAareAtheAfundamentalAvariablesAofAtheAincomeAtaxAsystemAthatAdecision-
makersAshouldAbeAfamiliarAwithAsoAthatAtheyAcanAapplyAtaxAissuesAtoAtheirAareasAofAresponsibili
ty?
4. WhatAisAanA―after-tax‖AapproachAtoAdecisionAmaking?
SolutionsAtoAReviewAQuestions
R1-
1AOnceAprofitAisAdetermined,AtheAIncomeATaxAActAdeterminesAtheAamountAofAincomeAtaxAthatAres
ults.AHowever,AatAallAlevelsAofAmanagement,AalternativeAcoursesAofAactionAareAevaluated.AInAman
yAcases,AtheAchoiceAofAoneAalternativeAoverAtheAotherAmayAaffectAbothAtheAamountAandAtheAtimin
gAofAfutureAtaxesAonAincomeAgeneratedAfromAthatAactivity.ATherefore,AtheApersonAmakingAthoseA
decisionsAhasAaAdirectAinputAintoAfutureAafter-
taxAcashA flow.AObviously,AdecisionsAthatAreduceAorApostponeAtheApaymentAofAtaxAaffectAtheAulti
mateAreturnAonAinvestmentAand,AinAturn,AtheAvalueAofAtheAenterprise.AIncludingAtheAtaxAvariableA
asAaApartAofAtheAformalAdecisionAprocessAwillAultimatelyAleadAtoAimprovedAafter-taxAcashAflow.
R1-
2AExpansionAcanAbeAachievedAinAnewAgeographicAareasAthroughAdirectAselling,AorAbyAestablishin
gAaAformalApresenceAinAtheAnewAterritoryAwithAaAbranchAofficeAorAaAseparateAcorporation.ATheAn
ewAterritoriesAmayAalsoAcrossAprovincialAorAinternationalAboundaries.AProvincialAincomeAtaxArate
sAvaryAamongstAtheAprovinces.ATheAamountAofAincomeAthatAisAsubjectAtoAtaxAinAtheAnewAprovinc
eAwillAbeAdifferentAforAeachAofAtheAthreeAalternativesAmentionedAabove.AForAexample,AwithAdirec
tAselling,AnoneAofAtheAincomeAisAtaxedAinAtheAnewAprovince,AbutAwithAaAseparateAcorporation,Aall
AofAtheAincomeAisAtaxedAinAtheAnewAprovince.ABecauseAtheAtaxAcostAisAdifferentAinAeachAcase,Ata
xationAisAaArelevantApartAofAtheAdecisionAandAmustAbeAincludedAinAanyAcost-
benefitAanalysisAthatAcomparesAtheAthreeAalternativesA[Reg.A400-402.1].
R1-
3AAAbasicAunderstandingAofAtheAfollowingAvariablesAwillAsignificantlyAstrengthenAaAdecisionAma
ker'sAabilityAtoAapplyAtaxAissuesAtoAtheirAareaAofAresponsibility.
TypesAofAIncome - Employment,ABusiness,AProperty,ACapitalAgains
, TaxableAEntities - Individuals,ACorporations,ATrusts
AlternativeABusiness - Corporation,AProprietorship,APartnership,ALimited
Structures partnership,AJointAarrangement,AIncomeAtrust
TaxAJurisdictions - Federal,AProvincial,AForeign
R1-
4AAllAcashAflowAdecisions,AwhetherArelatedAtoArevenues,Aexpenses,AassetAacquisitionsAorAdivestit
ures,AorAdebtAandAequityArestructuring,AwillAimpactAtheAamountAandAtimingAofAtheAtaxAcost.A Ther
efore,A cashA flowA existsA onlyA onA anA afterA taxA basis,A and,A theA taxA impactsA whetherAorAnotAtheAult
imateAresultAofAtheAdecisionAisAsuccessful.AAnAafter-taxAapproachAtoAdecision-
makingArequiresAeachAdecision-makerAtoAthinkA"after-
tax"AforAeveryAdecisionAatAtheAtimeAtheAdecisionAisAbeingAmade,Aand,AtoAconsiderAalternativeAcour
sesAofAactionAtoAminimizeAtheAtaxAcost,AinAtheAsameAwayAthatAdecisionsAareAmadeAregardingAothe
rAtypesAofAcosts.
FailureA toA applyA anA after-
taxA approachA atA theA timeA thatA decisionsA areA madeA mayA provideAinaccurateAinformationAforAevaluation,Aa
nd,AresultAinAaApermanentlyAinefficientAtaxAstructure.
CHAPTERA2
FUNDAMENTALSAOFATAXAPLANNING
ReviewAQuestions
1. ―TaxAplanningAandAtaxAavoidanceAmeanAtheAsameAthing.‖AIsAthisAstatementAtrue?AExplain.
2. WhatAdistinguishesAtaxAevasionAfromAtaxAavoidanceAandAtaxAplanning?
3. DoesACanadaARevenueAAgencyAdealAwithAallAtaxAavoidanceAactivitiesAinAtheAsameAway?AExpla
in.
4. TheApurposeAofAtaxAplanningAisAtoAreduceAorAdeferAtheAtaxAcostsAassociatedAwithAfinancialAtran
sactions.AWhatAareAtheAgeneralAtypesAofAtaxAplanningAactivities?ABrieflyAexplainAhowAeachAofAt
hemAmayAreduceAorAdeferAtheAtaxAcost.
5. ―ItAisAalwaysAbetterAtoApayAtaxAlaterAratherAthanAsooner.‖AIsAthisAstatementAtrue?AExplain.
6. WhenAcorporateAtaxAratesAareA13%AandAtaxAratesAforAindividualsAareA40%,AisAitAalwaysAbetterAf
orAtheAindividualAtoAtransferAtheirAbusinessAtoAaAcorporation?
7. ―AsAlongAasAallAofAtheAincomeAtaxArulesAareAknown,AaAtaxAplanAcanAbeAdevelopedAwithAcertai
nty.‖AIsAthisAstatementAtrue?AExplain.
8. WhatAbasicAskillsAareArequiredAtoAdevelopAaAgoodAtaxAplan?
9. AnAentrepreneurAisAdevelopingAaAnewAbusinessAventureAandAisAplanningAtoAraiseAequityAcapitalA
