Final answer:
Allowing an investment to increase in value without selling it is an example of tax planning by changing the timing of recognition of taxable income and changing the character of income. The correct answer is (d) Only (a) and (b).
Step-by-step explanation:
An investment increasing in value without selling it is an example of tax planning by changing the timing of recognition of taxable income (option a) and changing the character of income (option b).
When an investment increases in value, the investor does not have to recognize taxable income until they sell the investment. By delaying the sale, the investor can defer the recognition and payment of taxes.
Additionally, changing the character of income refers to structuring the investment in a way that allows the investor to receive income that is taxed at a lower rate. For example, capital gains are generally taxed at a lower rate than ordinary income, so structuring the investment to generate capital gains instead of ordinary income can result in tax savings.
Therefore, the correct answer is (d) Only (a) and (b).