Instructor’s Solutions Manual for Byrd & Chen’s Canadian Tax Principles, 2025-2026 Edition by Gary Donell | Volume 1
Instructor’s Solutions Manual for Byrd & Chen’s Canadian Tax Principles, 2025-2026 Edition by Gary Donell | Volume 2
Chapter 1 Instructor’s Solutions Manual
Answers to Quick Review Questions
1. B. Gross income is part of net income but is not a step separate from net income.
2. A
3. C. TIEAs are designed to share information with another country to address tax evasion. TIEAs are
not designed to address double taxation, which is the purpose of a tax treaty.
4. B. An individual is not a Canadian resident based solely on citizenship.
5. C
6. E. The shares remain a source of income even if no income is actually received in a given year.
7. B
8. B. The non-resident would have to own 25% of all the shares of a class issued by the corporation
for the shares to be taxable Canadian property.
9. D is the most important, and B the least important.
10. E
Solutions to Assignment Problems
Solution to AP 1-1
Although there may not be one single solution to this problem, and student answers will be
limited to their preliminary understanding of income tax concepts and procedures, this
problem provides the basis for an interesting discussion of various qualitative characteristics.
Equity or Fairness The increase provides both horizontal and vertical equity. Individuals
with the same income will receive the same treatment, while individuals with different
amounts of income will be treated differently.
Neutrality The increase is not neutral. It targets high-income individuals and is likely to
influence their economic decisions.
Adequacy While the increase was intended to create additional revenues, there is some
evidence that the opposite has happened. This reflects the fact that high-income individuals
are sometimes in a position to move some, or all, of that income out of Canada (e.g., move
their residence to the U.S.) and to engage in complex income splitting transactions.
Flexibility With respect to flexibility, the rate can be changed at any time. However, as a
practical matter, such changes would need to be made on an annual basis.
