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Flashcards in Taxes: Tax Planning Deck (4)
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1

Taxes:
Tax Planning
Using Tax Rates

Using Tax Rates
- marginal rate should be used for decision making
- if rates are increasing in future, accelerate income and defer deductions
- if rates are decreasing in future, accelerate deductions and defer income
- difference in rate over time:
- changing tax brackets
- time value of money (dont consider unless told)
- statutory changes in rates
- shift income to lower bracket tax payers
- difference based on character
- difference based on jurisdiction
- effective income rate = federal liability/income

2

Taxes:
Tax Planning
Tax Strategies

Tax Strategies
- avoid income by choosing non-taxable fringe benefits over salary
- defer income by meeting rules such as like-kind exchange
- max contributions to retirement plans
- recognize capital gains if losses already recognized
- generate passive income to offset recognized passive loss
- ensure that carryforwards are used before expired

3

Taxes:
Tax Planning
Planning for AMT

Planning for AMT
- reduce adj & preferences that increase AMT
- minimize deductions not allowed in years expected to be subject to AMT
- no deduction for taxes
- no allowance for 2% misc deductions
- home mortgage interest only deductible if loan proceeds used to improve loan
- accelerate income into AMT year

4

Taxes:
Tax Planning
Charities

Tax Planning
Charities
- gifting appreciated property to charities avoids recognizing appreciation as income
- loss property should not be gifted because loss not recognized

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