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10 Cards in this Set
- Front
- Back
What is tax planning?
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The structuring of transactions to reduce tax costs or increase tax savings to maximize net present value.
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What is tax avoidance?
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The implementation of legal strategies for reducing taxes.
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What is tax evasion?
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The willful and deliberate attempt to defraud the government by understanding a tax liability through illegal means.
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What are the four variables common to all transactions?
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The entity variable: Which entity undertakes the transaction?
The time period variable: During which tax year or years does the transaction occur. The jurisdiction variable: In which tax jurisdiction does the transaction occur? The character variable: What is the tax character of the income from the transaction? |
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What is the first income tax planning maxim?
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Tax costs decrease (and cash flows increase) when income is generated by an entity subject to a low tax rate.
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What is deduction shifting?
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Entities with different marginal rates can save tax not only by shifting income but also by shifting deductible expenses.
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What is the assignment of income doctrine?
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Income must be taxed to the entity that renders the service or owns the capital with respect to which the income is paid.
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What is tax planning maxim two?
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In present value terms, tax costs decrease (and cash flows increase) when a tax is deferred until a later taxable year.
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What is ordinary income?
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Any income that is not capital gain. Ordinary income is taxed at the regular individual or corporate tax rates.
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What is capital gain/loss?
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Any asset that does not fall into one of eight statutory categories of noncapital assets. Most business assets (AR, supplies, inventory, tangible personalty, realty, and purchased intangibles) are noncapital assets.
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