Question

When considering the timing of transactions, what tax planning strategy should be used for tax deductions if tax rates are constant?

A) Accelerate deductions
B) Defer deductions
C) Eliminate deductions
D) Ignore deductions

Answer 1

The tax planning strategy that should be used for tax deductions if tax rates are constant is to accelerate deductions.

Step-by-step explanation:

When considering the timing of transactions, the tax planning strategy that should be used for tax deductions if tax rates are constant is to accelerate deductions.

By accelerating deductions, a taxpayer can take advantage of the tax benefit sooner rather than later. This can help reduce the current tax liability by offsetting income with deductions. For example, a taxpayer can prepay expenses or make charitable contributions before the end of the year to increase deductions and lower their taxable income.

Accelerating deductions is particularly beneficial when tax rates are expected to remain constant because it allows for immediate tax savings, rather than gambling on potential future changes in tax rates.