Chapter 3 Tax Planning Strategies and Related Limitations

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?

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

(12)
[LO4] What factors have to be
present for income shifting to be a viable strategy?

(13)
[LO4] Name three common types
of income shifting.

(14)
[LO4] What are some ways that a
parent could effectively shift income to a child? What are some of the disadvantages of these
methods?

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