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Shifting Income

Shifting Income - rates If current tax rates are lower...

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Shifting Income from One Time Period to Another * In most cases, there is a very definite time frame for recognizing income for tax purposes, and so there is little opportunity to choose between discretionary alternatives * A taxpayer can sometimes choose to recognize income or claim a deduction from income in a different time period; however it does not inevitable follow that wealth will be enhanced if those discretionary choices are exercised * Future tax rates may be greater then, less than, or the same as current tax
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Unformatted text preview: rates * If current tax rates are lower than the expected future rates, the absolute tax cost can be reduced by recognizing income now rather than later. This reduction in tax cost incurs another cost - the cost of Fnancing the payment of tax in advance. As long as the tax savings is greater than the related Fnancing cost, a wealth enhancement will result for the taxpayer....
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