tax avoidance

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Tax Avoidance

The process whereby an individual plans his or her finances so as to apply all exemptions and deductions provided by tax laws to reduce taxable income.

Through tax avoidance, an individual takes advantage of all legal opportunities to minimize his or her state or federal Income Tax, gift tax, or estate tax. An individual may, for example, avoid federal income tax by investing a large sum of money in municipal bonds, since the interest on such bonds is not considered taxable income on which federal tax is due. Interest on the same amount of money placed in a savings account must be included as taxable income.

Tax avoidance must be distinguished from Tax Evasion, which is the employment of unlawful methods to circumvent the payment of taxes. Tax evasion is a crime; tax avoidance is not.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

tax avoidance

legally reducing tax liability. Tax planning is the activity by which a taxpayer seeks to arrange his affairs so that his tax liability is minimized; avoidance of tax within the limits of tax law is perfectly legitimate. Some forms of avoidance are merely tax planning by using reliefs or exemptions, for example, by choosing tax-efficient investments. Others are convoluted and rather artificial. See TAX EVASION.
Collins Dictionary of Law © W.J. Stewart, 2006
References in periodicals archive ?
The lead singer of rock band U2 was an investor in a Lithuanian shopping mall through a company based in Malta, which is also a country that foreign investors can use to avoid taxes, according to the Guardian Sunday.
Often these companies are created to avoid taxes, and provide some financial or legal benefits to the owners.
citizenship to avoid taxes, and still be able to return home for months on end because the law barring their re-entry is rarely, if ever enforced?
Allan Stein, tax counsel for the American Insurance Association, said the industry, in short, wants the insurance buyer to avoid taxes imposed by the IRS.
The Indianapolis Baptist Temple has tried a variety of methods to avoid taxes, from changing its name to arguing it is protected under the First Amendment.
if you paid $3,000 for 100 shares and you sold them for $3,500, the $500 is taxable as capital gains A benefit of holding stocks is you avoid taxes on any increased value, Kay says.
Often these companies are created to avoid taxes and provide some financial or legal benefits to the owners.
Global Banking News-February 12, 2015--WSJ says BofA helped clients avoid taxes
companies taking profits overseas to avoid taxes , with Apple (Nasdaq:AAPL) in particular singled out for criticism by U.S.
However, Gardner noted that it is likely that there are more companies than those on CTJ's list that avoid taxes by keeping their profits in other countries.
taxes, because the information submitted clearly establishes the lack of a principal purpose to avoid taxes under subtitle A or B of the Code.
After years of winking at the practice, Congress is suddenly up in arms about companies moving their headquarters to Bermuda to avoid taxes. In the House and Senate, legislators have introduced laws that would forbid CEOs from booking first-class passage to the nearest tropical tax shelter.