Tax Research Paper: Maxims of Tax Planning and Six Steps of Tax Research
Business organizations use financial planning techniques to help make decisions that will maximize the net present value of the entity. An important component of the financial planning process is tax planning, which is the structuring of transactions with the intent reducing tax costs and gaining tax benefits. Strategic tax planning is a common occurrence in the business world because of its ability to help companies maximize their after-tax value.
Typically, firms use the services of outside specialists, also known as tax researchers, in tax planning. The role of the tax specialist is to determine the optimal business decisions that its client firm should make, as they relate to tax. When the tax consequences for …show more content…
Typically this research process is divided into six distinct steps.
IV. The Six Steps of Tax Research
To begin it is important that the tax consultant is able to fully understand the proposed transactions as well as the surrounding facts that can potentially impact the cash flows of the transaction and its legality. Specifically the specialist aims to understand the client's main objective as well as the expected results of the transaction, which will allow him/her to create a tax plan that best meets its client's needs.
The second step in tax research is to identify the tax issues, problems, and opportunities that are revealed by the facts and information gathered in the prior step. This enables the tax consultant to devise specific tax research questions that must be addressed in order to create the most beneficial tax plan for the company. In most cases, it is found that there are several questions that must be answered in order to establish the ideal tax strategy. In this case, it is essential that the researcher considers the order in which the questions should be answered, because in many situations the answer to a question will be dependent on prior answers.
After all necessary questions are formulated the actual research begins, the specialist begins step four of the process, the actual researching. In search of answers to the questions formulated in step five, two types of reference material are used, those considered to have primary