Tax efficiency

For the economic theory of tax efficiency, see Excess burden of taxation.

A financial process is said to be tax efficient if it is taxed at a lower rate than an alternative financial process that achieves the same end.[1]

Passing one's assets onto one's heirs using a Grantor Retained Annuity Trust, for example, is potentially more tax efficient than simply letting the heirs inherit the assets.

Another example: An exchange-traded fund (ETF) that follows the S&P 500 Index generates fewer "taxable events" than a mutual fund that follows the same index.[2]

References

  1. ↑ Investor Words definition of "tax efficient"
  2. ↑ ETFs vs. mutual funds: Tax efficiency
This article is issued from Wikipedia - version of the 1/3/2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.