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Tax question : Lucinda is contemplating a long-range planning strategy that will allow her to defer...

Tax question : Lucinda is contemplating a long-range planning strategy that will allow her to defer sizable portions of her income for 10 years. What type of planning strategy is she contemplating? What are some potential risks associated with this type of strategy?

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Answer #1

Lucinda is contemplating a long term timing stretegy, which defers the income to the successive years, reducing the taxable income and income tax for the current year.  

One potential risk associated with this type of strategy is frequent changes in the tax laws which lawmakers make to stimulate economy via economic policy initiatives and to increase government reserves which includes change in tax rates. May be in future the tax rate may surge up and the newly elected officials may change the tax laws which may cease Lucinda's income defferal stretegy which will eventually hit Lucinda's finances hard.

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