Respond to at least one of the following questions:
1. Tax planning methods involve four key variables: The entity variable, the time period variable, the jurisdiction variable and the character variable. To illustrate the application of these variables, select one variable and briefly describe a situation as to how that variable might be used to structure the situation to be most tax efficient (e., to minimize taxes). You may choose a business decision, formation of a new business, or any other relevant type of activity that would involve tax considerations.
2. Clearly, benefits accrue by reducing taxes in the current year, but reducing taxes may result in tax and non-tax costs to a company. List one type of cost that may be incurred when it comes to taking actions that reduce taxes and indicate how you might deal with deciding whether to take the action to reduce a company’s current year’s taxes.
3. How would a company’s marginal tax rate affect its investment and capital structure (mix of debt and equity to finance its operations) decisions? Provide an illustration to explain your analysis, using a company in a high tax bracket or a low tax bracket.