Strategic Business Tax Planning

<p>ABOUT THE AUTHORS V</p>
<p>ACKNOWLEDGMENTS XIII</p>
<p>INTRODUCTION XV</p>
<p>PART 1 Strategic Tax Planning 1</p>
<p>CHAPTER 1 A Framework for Understanding Taxes 3</p>
<p>How Are Taxes Important in Decision Making? 5</p>
<p>Types of Taxes 8</p>
<p>Basic Principles of Taxation 30</p>
<p>Sources of Tax Laws 35</p>
<p>Important Principles and Concepts in Tax Law 42</p>
<p>SAVANT Framework 56</p>
<p>CHAPTER 2 Using the SAVANT Framework to Guide Tax Planning 61</p>
<p>Strategy 63</p>
<p>Anticipation 66</p>
<p>Value–Adding 72</p>
<p>Negotiating 83</p>
<p>Transforming 85</p>
<p>Putting It All Together: SAVANT Concepts Illustrated 87</p>
<p>PART 2 Forming the Enterprise 93</p>
<p>CHAPTER 3 Choosing a Legal Entity: Risk Management, Raising Capital, and Tax Management 95</p>
<p>Strategy 100</p>
<p>Anticipation and Timing Issues 106</p>
<p>Value–Adding 108</p>
<p>Negotiating 110</p>
<p>Transforming 112</p>
<p>Putting It All Together: Applying SAVANT to Entity Choice 116</p>
<p>Specialized Legal Forms 118</p>
<p>CHAPTER 4 Financing a New Venture 125</p>
<p>Internal Financing 126</p>
<p>External Financing: Debt versus Equity 129</p>
<p>PART 3 Operating the Firm 153</p>
<p>CHAPTER 5 New Products: Development, Promotion, and Advertising 155</p>
<p>New Products and Product Improvement 155</p>
<p>SAVANT and Research and Development 175</p>
<p>CHAPTER 6 Attracting and Motivating Employees and Managers: Company and Employee Tax Planning 179</p>
<p>Executive Compensation 180</p>
<p>Nonexecutive Employee Compensation 182</p>
<p>Perquisites 189</p>
<p>Pension and Profit–Sharing Plans 191</p>
<p>Current and Deferred Compensation 195</p>
<p>Limits on Deductibility on Executive Compensation 195</p>
<p>Stock Options 196</p>
<p>Management Bonus Plans 202</p>
<p>Financial Statement/Finance versus Tax Strategy Trade–Offs 204</p>
<p>Putting It All Together: Applying SAVANT to Executive</p>
<p>Compensation 206</p>
<p>CHAPTER 7 Market Penetration: Operating in Different States 213</p>
<p>General Principles of State and Local Taxation 216</p>
<p>Planning with Income Taxes: Manipulation of Plant, Workforce, and Point–of–Sale Locations 217</p>
<p>Location Choice: Sourcing versus Production Platforms 228</p>
<p>Distribution: Planning for Sales and Use Taxes 230</p>
<p>Lobbying and Tax Abatements 235</p>
<p>Trade–Offs with Local Tax Incentives: Infrastructure, Government Costs/Subsidies, and Other Local Costs 237</p>
<p>Putting It All Together: SAVANT Applied to Market Penetration in Other States 237</p>
<p>CHAPTER 8 Market Penetration: Company and Employee Tax Planning for Operating in Foreign Countries 241</p>
<p>Some Basics on U.S. Taxation of Overseas Operations 241</p>
<p>Some Basics on Taxation by Countries Other than the United States 244</p>
<p>Tax Treaties 245</p>
<p>Effective Tax Management 247</p>
<p>Putting It All Together: Penetrating Foreign Markets from a SAVANT Perspective 263</p>
<p>CHAPTER 9 Operations Management 269</p>
<p>Production Design and Process Selection 269</p>
<p>Inventory: Methods of Accounting and Includable Amounts 273</p>
<p>Strategic Capacity Planning: Plant versus People 283</p>
<p>Putting It All Together: Operations Management from a SAVANT Perspective 289</p>
<p>CHAPTER 10 Financing Ongoing Operations and Tax Planning 293</p>
<p>Operating Earnings 294</p>
<p>Sale of Operating Assets 294</p>
<p>Sale of Investments 296</p>
<p>Short–Term Borrowing 298</p>
<p>Accounts Receivable 299</p>
<p>Decrease in Dividends 300</p>
<p>Stock Dividends 302</p>
<p>Stock Buybacks 303</p>
<p>Using Employee Stock Ownership Plans 305</p>
<p>Receipt of Dividends from Subsidiaries 306</p>
<p>Putting It All Together: Financing Ongoing Operations from a SAVANT Perspective 312</p>
<p>CHAPTER 11 Capital Budgeting 319</p>
<p>Fixed Asset Acquisition 319</p>
<p>Analysis from a SAVANT Perspective 324</p>
<p>Putting It All Together: SAVANT Concepts Applied to Capital Budgeting 332</p>
<p>Make or Buy Decisions 334</p>
<p>Capital Budgeting and Plant Capacity 338</p>
<p>Risk Considerations 343</p>
<p>CHAPTER 12 Financial Statement Analysis and Proactive Tax Planning 347</p>
<p>Segmental Analysis 347</p>
<p>Other Tax Aspects in Segmental Analysis 350</p>
<p>Strategic Analysis: Using Competitor s Tax Note and Segmental Data 356</p>
<p>PART 4 Changing Original Form 367</p>
<p>CHAPTER 13 Restructuring 369</p>
<p>Financial Restructuring 369</p>
<p>Financial Restructuring in the SAVANT Framework 372</p>
<p>Business Restructuring 375</p>
<p>Legal Entity Restructuring 376</p>
<p>Divestitures in the SAVANT Framework 382</p>
<p>Selling Off Parts of the Business 383</p>
<p>Selling a Business to an Outside Entity 384</p>
<p>CHAPTER 14 Mergers and Acquisitions 391</p>
<p>Some General Tax Rules 393</p>
<p>Tax–Free Mergers and Acquisitions 393</p>
<p>Statutory Mergers and Consolidations 395</p>
<p>Taxable Mergers and Acquisitions 402</p>
<p>Tax Planning and Acquisition Costs 405</p>
<p>Allocating Purchase Price 406</p>
<p>Financial Accounting Trade–Offs 406</p>
<p>Maximizing Tax Benefits 407</p>
<p>Leveraged Buyouts 411</p>
<p>Sources of Merger and Acquisition Finance 412</p>
<p>Defensive Strategies 415</p>
<p>Merger and Acquisition Activity and Scrutiny by Tax Authorities 416</p>
<p>Putting It All Together: Merger and Acquisition from a SAVANT Perspective 417</p>
<p>CHAPTER 15 Other Topics in Changing Original Form 421</p>
<p>Use of Flow–Through Entities for Divestitures 421</p>
<p>Use of Flow–Through Entities for Acquisitions 425</p>
<p>Liquidations 426</p>
<p>Buying a Subsidiary for Its Assets 432</p>
<p>Fighting Off Takeover Attempts with ESOPs 437</p>
<p>Bankruptcies 439</p>
<p>APPENDIX A Basic Tax Research Skills 441</p>
<p>Steps in the Research Process 441</p>
<p>Sources of the Law 441</p>
<p>Getting Answers to Simple Questions 443</p>
<p>APPENDIX B Present Value Analysis: Lump Sums 445</p>
<p>Annuities 447</p>
<p>Uneven Cash Flows 449</p>
<p>INDEX 451</p>