Which of the following is an example of the timing strategy?
A) A cash basis taxpayer paying all outstanding bills by year end
B) A parent employing her child in the family business
C) A business paying its owner a $30,000 salary
D) A taxpayer investing in a tax preferred investment
E) None of these

Question

Quizplus · Accepted Answer

The timing strategy involves timing the payment or receipt of income or expenses to take advantage of lower tax rates or deductions in a certain tax year. Paying outstanding bills by year-end can potentially increase the amount of tax deductions in the current year and lower taxable income. The other options do not involve timing strategies but rather involve tax planning strategies such as income shifting (B), reasonable compensation (C), and tax-preferred investments (D).

Which of the Following Is an Example of the Timing