University of Texas COURSE ACC 355, Spring 2014 -Chapter 3 Tax Planning Strategies and Related Limitations(DISCUSSIONS)

Discussion
Questions

(1)
[LO1] “The goal of tax planning
is to minimize taxes.” Explain why this
statement is not true.

(2)
[LO1] Describe the three
parties engaged in every business transaction and how understanding taxes may
aid in structuring transactions.

(3)
[LO1] In this chapter we discussed three basic tax
planning strategies. What different
features of taxation does each of these strategies exploit?

(4)
[LO2] What are the two basic
timing strategies? What is the intent of
each?

(5)
[LO2] Why is the timing strategy particularly effective
for cash-method taxpayers?

(6)
[LO2] What are some common
examples of the timing strategy?

(7)
[LO2] What factors increase the
benefits of accelerating deductions or deferring income?

(8)
[LO2,LO3] How do changing tax rates affect the timing
strategy? What information do you need
to determine the appropriate timing strategy when tax rates change?

(9)
[LO2,LO6] Describe the ways in
which the timing strategy has limitations.

(10)
[LO3] The concept of the time
value of money suggests that $1 today is not equal to $1 in the future. Explain why this is true.

(11)
[LO3] Why is understanding the
time value of money important for tax planning?

(12)
[LO3] What two factors increase
the difference between present and future values?

(13)
[LO4] What factors have to be present for income shifting
to be a viable strategy?

(14)
[LO4] Name three common types
of income shifting.

(15)
[LO4] What are some ways that a
parent could effectively shift income to a child? What are some of the disadvantages of these
methods?

(16)
[LO4] What is the key factor in
shifting income from a business to its owners?
What are some methods of shifting income in this context?

(17)
[LO4] Explain why paying
dividends is not an effective way to shift income from a corporation to its
owners.

(18)
[LO5] What are some of the
common examples of the conversion strategy?

(19) [LO5] What is needed
to implement the conversion strategy?

(20)
[LO5] Explain how implicit
taxes may limit the benefits of the conversion strategy.

(21)
[LO6] Several judicial
doctrines limit basic tax planning strategies.
What are they? Which planning
strategies do they limit?

(22)
[LO6] What is the constructive
receipt doctrine? What types of
taxpayers does this doctrine generally affect?
For what tax planning strategy is the constructive receipt doctrine a
potential limitation?

(23)
[LO6] Explain the assignment of
income doctrine. In what situations
would this doctrine potentially apply?

(24)
[LO6] Relative to arm’s-length
transactions, why do related-party transactions receive more IRS scrutiny?

(25)
[LO6] Describe the business purpose, step-transaction,
and substance-over-form doctrines. What
types of tax planning strategies may these doctrines inhibit?

(26)
[LO7] What is the difference
between tax avoidance and tax evasion?

(27)
[LO7] What are the rewards of
tax avoidance? What are the rewards of
tax evasion?

(28)
[LO7] “Tax avoidance is
discouraged by the courts and Congress.”
Is this statement true or false?
Please explain.