. Many tax planning ideas save taxes in exchange for a fee. Tax planners have ca

Question

. Many tax planning ideas save taxes in exchange for a fee. Tax planners have called this “selling dollars at discount.” Problem 1 asks you to consider if there is an implicit tax in such a planning arrangement. Many planning ideas are also probabilistic, and have less than 100% certainty of success. Using the approach suggested in chapter 5, how would you suggest that the probability of success would factor into the decision-making process (to take the idea or to reject it)?

1. A property tax consulting firm offers to argue for a reduced tax assessment on behalf of a homeowner. The consulting firm will charge a fee equal to 30% of the reduced taxes paid from a reduced assessment. If no reduction is obtained, there is no fee. Is there an implicit tax in this arrangement?

Explanation / Answer

Implicit tax is the cost of an activity that is not collected by the government but may be the result of government policy for example : if the government is encouraging economic growth and accepting a high inflation rate one may consider this an implicit tax on personal saving because inflation render them worth less over times .

Is there is no implicit tax in this arrangement.

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