Which of the following decreases the benefits of accelerating deductions?
A) decreasing tax rates.
B) smaller after-tax rate of return.
C) larger after-tax rate of return.
D) larger magnitude of transactions.
E) none of these.

Question

Quizplus · Accepted Answer

Accelerating deductions reduces taxable income in the current period, resulting in a lower tax liability, but it also reduces the amount of deductions that can be claimed in future years. The benefits of accelerating deductions decrease if the after-tax rate of return on the investment generating the deduction is small, as the reduction in tax liability may not offset the lost opportunity cost of the foregone investment.

Which of the Following Decreases the Benefits of Accelerating Deductions