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Principles of Taxation for Business and Investment Planning, 5/e
Sally M Jones, University of Virginia
Fundamentals of Tax Planning
The Basic Maxims of Income Tax Planning

Chapter 4 Objectives

After studying this chapter, you should be able to:

1. Differentiate between the concepts of tax avoidance and tax evasion.

2. List the four variables that interact to determine the tax consequences of a business transaction.

3. Explain why an income shift or a deduction shift from one entity to another can improve after-tax cash flows.

4. Explain how the assignment of income doctrine constrains income-shifting strategies.

5. Identify the circumstances in which a strategy that defers tax liability may not improve the net present value of a transaction.

6. Explain why the distinction between ordinary income and capital gain is important in the tax planning process.

7. Distinguish between an explicit tax and an implicit tax.

8. Summarize the four basic maxims that firms use to develop tax planning strategies.

9. Describe the three tax law doctrines that the IRS can use to challenge the favorable outcome of a tax planning strategy.





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