Which of the following is an example of the income shifting strategy?
A) A corporation paying its shareholders a $20,000 dividend
B) A corporation paying its owner a $20,000 salary
C) A high tax rate taxpayer investing in tax exempt municipal bonds
D) A cash-basis business delaying billing its customers until after year end
E) None of these

Question

Quizplus · Accepted Answer

Paying an owner a salary is an example of income shifting strategy as it allows the corporation to deduct the salary as a business expense, which reduces its taxable income, while the owner will pay income tax on the salary at their individual tax rate.

Which of the Following Is an Example of the Income