The breakeven tax rate is the level of tax that does not motivate or discourage participation. It leaves investors indifferent and requires other means to entice participation. It is useful for investors uninterested in tax advantages and allows for focus on higher risk investments. Brokers can advise on balanced tax rate opportunities.
The breakeven tax rate has to do with the level of tax that would be incurred as part of a financial arrangement that neither motivates nor discourages participation. A break-even tax rate tends to leave the investor somewhat indifferent. This creates a situation where the investor must be enticed to participate in the transaction by other means, rather than relying on tax breaks to get the deal done.
In one sense, a breakeven tax rate has a limited degree of interest to an investor. Since the tax rate associated with the proposed deal will tend not to be an amount that the investor would consider prohibitive, the issue of taxes associated with the opportunity is quickly sidelined. This will provide the broker or dealer with an opportunity to focus the investor’s attention on other aspects of the transaction or series of transactions, emphasizing the other merits of the arrangement.
A break-even tax rate may also serve the purpose of an investor who has little or no interest in obtaining any type of tax advantage from investments. With no real reason to dwell on the possibility of incurring a high level of taxation regardless of the performance of the investment, it is possible to focus more on certain investments that may contain a higher degree of risk. The limited projection of applicable tax rates coupled with the potential to make a higher profit can create just enough interest to make an investor take the risk and go with the investment.
All types of investors can take advantage of opportunities that involve a break-even tax rate. Individuals, corporations, and other entities can find deals that will work in a way that achieves a balanced tax rate. Brokers are generally aware of any number of investments that could generate this type of tax situation and can readily advise potential investors on how to proceed.
Smart Asset.
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