Question
Suppose that you propose a generic tax planning idea for your corporate client that you believe will not affect current before-tax cash flows but will
Suppose that you propose a generic tax planning idea for your corporate client that you believe will not affect current before-tax cash flows but will generate the following annual tax deductions: a. Year 1: $8,000 Year 2: $13,000 Year 3: $22,000 However, there is only a 60% chance that the IRS will detect and accept the results of the tax plan. If the IRS does not accept the plan, the tax savings each year will be zero. Assuming that your client is risk-neutral (i.e., that it is not afraid of risk but also does not seek out risk), compute the maximum fee you could charge your client to design and implement this tax plan. You can ignore time-value of money considerations for this relatively short time horizon.
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