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Taxable Event

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A taxable event is any transaction or occurrence that results in taxes due. All taxpayers, including individuals and corporations, experience taxable events. The most common taxable event is the payment and receipt of wages. Other taxable event transactions include the receipt of taxable interest and/or dividends and money withdrawals from an IRA. The sale of investments for profit is a taxable event as well.
When engaged in tax planning, considering the timing of various taxable events can result in different tax liabilities. Wages, interest earned, and dividends received normally represent a fixed taxable event. However, sales of investments and, in some cases, bonuses received can each be a timed or variable taxable event. In fact, properly timing the execution of such variable taxable events can reduce a taxpayer's tax liability. For example, selling a stock as either a short-term or long-term investment can result in different tax obligations. Also, placing a taxable event in one year versus another might offer a tax benefit.



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