Basics of Tax Planning

[Eric Williams]

So I see a lot of questions about ways to lower taxes.

Remember, the objective is not to minimize your tax liability as much as it is to maximize the net present value of the transaction.

As someone once told me an interview that I did not get the job for, mouths get fed with cash.

Tax planning is really a legal structuring and restructuring of a transaction so as to maximize the net present value of said transaction.

Remember when I restructure the transaction I restructure cash flow.

But those cash flows and their values from a tax standpoint are often based on timing, character, taxpayers involved, and jurisdictions among other things such as risk profile.

When I adjust those factors I am adjusting the value of the transaction (expected future benefits), e.g., a deduction taken earlier at the maximum ordinary rate in a state with no income state is more valuable than a suspended long-term capital loss (oversimplified but not a terrible example).