Examine the impact of taxation on management decision making?
Tax consequences of transactions cannot be ignored in decision making. For example, suppose a company or individual were considering two investment alternatives...one is a muni bond having a 4% rate while the other is a corporate bond at a 6% rate. In order to properly evaluate the better choice, the tax-free characteristics of the muni bond must be considered.
In more complex transactions such as business disposals, the transactions can be structured to meet certain tax regulations. Because of the vastly differing tax consequences, the actual sales price for the business may vary significantly. It may actually be that the lower priced offer yields a better after-tax profit because of the tax structuring. |
