Income stripping strategies between states

Resource Information

The work Income stripping strategies between states represents a distinct intellectual or artistic creation found in International Bureau of Fiscal Documentation. This resource is a combination of several types including: Work, Language Material, Continuing Resources.

Label

Income stripping strategies between states

Creator

• Aquilino, F.J
• Yang, J.G.S

Subject

• income tax
• losses
• earnings stripping
• tax rate
• state tax
• income classification

Language

eng

Summary

This article demonstrates that state income tax rates are quite different from one state to the next. The treatment of taxable income and deductible losses also varies. A taxpayer may take advantage of these differences by using the income stripping strategy to shift income and losses between two states. Whether income and losses are transferable is disputed among taxpayers and the state governments. This disagreement centers on the physical presence and economic nexus standards. In addition, this article scrutinizes what is taxable and deductible in a state, including the policies of "net income tax" and "gross income tax". Losses are deductible under the former, but not the latter. Further, under the "gross income tax" policy, income must be classified into six distinctive categories. Losses offset gains only if both fall into the same category. These differences give rise to many tax planning strategies. From the above developments, this article offers the guiding principles for engaging in an income stripping strategy

Citation source

In: Practical tax strategies. - Hoboken. - Vol. 97 (2016), no. 5 ; p. 201-208

Geographic coverage

North America

Language note

English