Page 229 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes 3. Future development: Strategic plans are usually expected to have a significant on future

prosperity of the organisation. This is because there is a long-term commitment. In case of
absence of long-term commitment, the firm cannot achieve future development.

4. Orientation: Strategic planning should keep in view of the competition existing in the

market. Some times firms have to face non-price competition.

5. Factors of Environment: Plans are always influenced by business environment always
influencing factor for decision-making. There may external or internal factors that infl uence

business. Buyers, Suppliers, government and competitors are likely to react in accordance
with changes in environment. Thus business also should act in the same passion.
6. Risk: Strategic plans mostly face the problem of risk. The plans should able to tackle the
risk bearing capacity. Risk and uncertainty are two important aspects, which cannot be
expected by business man.
10.1.3 Considerations Involved in Choosing Between Taxable and Tax-free
Sales or Acquisitions

Taxable sales and tax-free reorganisations can involve dispositions of stock or assets.

Careful consideration must be given to the type of payment used and the amount and kind of stock
or assets to be given or received in deciding between a taxable and a tax-free reorganisation.
Both taxable sales and tax-free reorganisations can involve dispositions of either assets or stock.
The parties are free to plan the transaction in whichever way is most beneficial to them. The

tax-free reorganisation provisions are drafted to allow the transaction to be structured to fall
within or outside of these provisions. Literal compliance with the statutory rules is required
before tax-free treatment will be granted but, as stated above, literal.
Unlike the target corporation and its shareholders, the acquiring corporation is generally not
concerned with immediate or deferred recognition of gain or loss because neither gain nor loss
will be realised unless the consideration provided by the acquirer is appreciated property.

10.1.4 Make-or-Buy Decision

The decision of whether to make or to buy is a problem that is frequently encountered by supply
managers who want to reveal and exploit every competency within the links of the supply chain.
Make or buy is a decision not to be made only on the basis of economic considerations, since
acquisition or loss of core competencies may also be involved.

Decisions regarding outsourcing significant functions are among the most strategic that can be
made by an organisation. They address the basic organisational choice of the functions for which
internal expertise is developed and nurtured and those for which such expertise is purchased.
Even an individual make-or buy decision can affect a company’s production methods, working
capital, and cost of borrowing or competitive position.
The make-or-buy decision is the act of making a strategic choice between producing an item
internally (in-house) or buying it externally (from an outside supplier). The buy side of the
decision also is referred to as outsourcing. Make-or-buy decisions usually arise when a fi rm

that has developed a product or part signifi cantly modified a product or parts having trouble
with current suppliers, or has diminishing capacity or changing demand. Make-or-Buy decision
(also called the outsourcing decision) is a judgment made by management whether to make a
component internally or buy it from the market. While making the decision, both qualitative and
quantitative factors must be considered.

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