Chapter 3- Tax Planning Strategies and Related Limitations

Chapter 3- Tax Planning Strategies and Related Limitations

1. Tax avoidance

   • Legal act of arranging your transactions to minimize taxes paid

2. Tax evasion

   • Willful attempt to defraud the government by not paying taxes legally owed

3. Future value = Present value x (1 + r) ^n

4. Present value = Future value / (1 +r) ^n

5. Tax-related timing strategies when tax rates are constant

   • Accelerate tax deductions
     • Deduct in an earlier period
   • Defer recognizing taxable income
     • Recognize in a later period