How tax planning can increaed your cash flow;

              How Tax Planning
Can Increase
Your Cash Flow/
by JOHN T. CONNOR / National Director—Tax Services
1#
With cash flow problems and
fluctuating interest rates
continuing to make
businesses and individuals alike uneasy
about the future, it is still astonishing to
discover how little strategic, or long-range,
tax planning is being done at the
highest corporate level—the CEO. Taxes
often are a company's largest expense,
readily gobbling up more than half of
its earnings. Minimizing that expense by
taking an action today that will reduce
taxes both this year and in future
years, and then making those funds
available for a company's operations
and growth, is a legitimate and impor­tant
element of financial planning. An
informed and planned use of taxes can
yield funds at a lower cost, and it can
allow for new acquisitions and for
greater emphasis on research and
development. Moreover, utilizing
strategic tax planning can give execu­tives
more time in which to reach the
right decisions and can help a business
not only to remain competitive but
indeed to become dominant.
More specifically, strategic tax plan­ning
must address such questions as:
• What is the best form and where is
the best place, in the U.S. or abroad, in
which to conduct a business, after
carefully balancing tax considerations
against operating concerns?
• What policies should govern the
acquisition of fixed assets, as well as
their amortization? Might leasing assets
be more advantageous than purchasing
them?
• What benefits can a business
provide its executives, as well as its
rank-and-file employees, at the least
after-tax cost?
• And, perhaps, most important of
all: what possibilities exist for deferring
the recognition of a business's taxable
income so that deferred taxes may be
used to finance that business?
Following are five examples of how
innovative strategic tax planning has
helped business executives substantially
reduce their taxes.
A Business in Transition
Not long ago, the CEO of a closely held
company with approximately $100
million in sales decided to turn the
direction of his company over to a new
generation and to a professional
managerial corps. What the CEO
wanted in the decade ahead was to
accumulate wealth and to achieve a
smooth transition, based on his estimate
of the company's growth during that