AC 750 Chapter 3

AC 750 Chapter 3 - tree from which it grew, no matter who...

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Tax Planning Chapter 3 We have a tax code that favors those  with the best  accountants --- Shane Keats
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AC 750 - Chapter 3 2 Tax Planning 1. The entity (tax rate) 3.  The jurisdiction (tax rate) 4.  The character (tax rate) *************************************************** 2. 3. Income Shifting (tax rate, time value of money) 4. Conversion (tax rate)    A Present value of   $cash $flow   D   Tax Base  x  Tax Rate  = Tax Liability Cost vs. benefit?
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Income Shifting Move income from a high rate return to a low rate return or Shift tax jurisdictions This is one of the most successful tax planning techniques! 3 AC 750 - Chapter 3
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AC 750 - Chapter 3 4 Who’s income is it? “Fruit of the Tree”  - the income is attributed to the
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Unformatted text preview: tree from which it grew, no matter who it is assigned to. Assignment of Income Doctrine – can’t avoid taxation by assigning your income to someone else. Applies to income from property or services. AC 750 - Chapter 3 5 The only legal way to shift income is to transfer ownership of income producing assets Conversion Strategies Compare AFTER TAX ra te s o f re turn Afte r Ta x re turn = pre -tax re turn x (1 – m a rg inal tax rate ) Watch out for taxes on the conversion! 6 AC 750 - Chapter 3 Planning Limitations 1. Business purpose doctrine 2. Step-transaction doctrine 3. Substance-over-form doctrine IRS 7 AC 750 - Chapter 3...
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This note was uploaded on 03/19/2012 for the course ACC 750 taught by Professor Tracynoga during the Spring '12 term at Bentley.

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AC 750 Chapter 3 - tree from which it grew, no matter who...

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