【正文】 n. For example, an effective tax plan does not allow a taxpayer to claim that the amount realized from the sale of property is exempt from ine unless the taxpayer can defend this claim against an IRS challenge. Although congressionally sponsored flat tax proposals typically reduce or eliminate the role of the IRS (., Armey, 1996), this analysis presumes that the IRS may observe the final structure of the transaction.Assumption 5: A flat tax system requires all taxpayers to use the same tax year.The final assumption provides additional structure to the proposed flat tax regime. Previous studies have shown that the Hall–Rabushka flat tax proposal does not provide any guidance on allowed tax accounting periods (., Feld, 1995。 Calegari, Key, and Smith, 1996). In the absence of any restrictions on the use of different tax years, taxpayers can use a plethora of different schemes to avoid taxes. For example, in the absence of any restrictions, cash basis businesses could postpone their tax liability by paying deductible fees to related taxpayers with different tax years. Since the tax minimization strategies that are associated with accounting periods are wellknown, I assume that all taxpayers in a flat tax system use the same tax year.EFFECTIVE TAX POSTPONEMENT STRATEGIESTax avoidance strategies are based on one or more of the three principles iterated in Stiglitz (1985). As shown in the prior section, effective use of a tax avoidance strategy also considers the three constraints described in Scholes and Wolfson (1992). In this section, I describe some simple tax planning techniques that can be used to postpone tax liabilities in the Hall–Rabushka flat tax system.Postponing Recognition of Sales or Service IneCash basis taxpayers can postpone their tax liabilities by delaying the receipt of payments for sales or services rendered during the current tax year to a future tax year. For businesses that are stable or growing, consistent use of this strategy over a long period of time is economically equivalent to a reduction in the aggregate ine reported. The current tax system places limits on the effective use of this strategy by restricting the availability of the cash method of accounting. In the proposed flat tax regime, all restrictions on the use of the cash method are removed. Consequently, this tax strategy can be used by virtually all businesses.Effective tax planning requires businesses to use this strategy with discretion. For example, indiscriminate use of this strategy may create cash flow problems for the firm. In order to reduce this nontax cost, it is mon for businesses to sell their goods or services under installment contracts that impose periodic interest payments on the outstanding balance. The current tax system places restrictions on the use of installment sales to defer ine. In the flat tax proposal, all businesses will be able to defer ine through installment sales as long as the installment contract is not considered to be a cash equivalent.The viability of postponing taxes by delaying the receipt of payments or using installment contracts depends critically on the acquiescence of the customer. Consumers of personaluse items or investment property may be willing to participate in a deferred payment contract because they are not adversely affected by the timing of the payment. However, most business customers would be unwilling to delay payments because they cannot deduct an item until they render payment. In this case, the tax savings to the seller would be offset by the tax liability incurred by the buyer. While business customers with currentperiod tax losses may be willing to defer payment until a subsequent tax year, the proposed interest adjustment to loss carry forwards and the presence of transaction costs create obstacles to the successful implementation of this strategy.Accelerating Purchases or Prepaying ExpensesIn the current system, cash basis taxpayers are able to postpone their tax payments by accelerating the payment of deductible business expenses. To reduce the potential revenue loss from this tax avoidance strategy, the current tax system places restrictions on the current deductibility of many items. For example, the cost of inventory items is not deductible until they are sold and the cost of capital expenditures and certain prepaid expenses must be depreciated or amortized over their estimated useful lives. Some items that are particularly subject to abuse (., passenger automobiles and artwork) have additional limitations. In the Hall–Rabushka proposal, many of the restrictions placed on this basic tax avoidance strategy are eliminated. Since the cost of businessuse property and services is immediately deductible, businesses have a strong incentive to accelerate their purchases and prepay their business expenses.The flat tax imposes a barrier to this “acceleration” strategy by requiring sellers to recognize ine upon receipt. When buyers and sellers have the same tax year and the seller has positive taxable ine, a buyer’s acceleration strategy is diametrically opposed to the seller’s deferral strategy. It is not unlikely that sellers will offer discounts for delaying payments until the beginning of the following tax year. When this occurs, buyers that accelerate their yearend payments will probably pay higher prices for purchases than those that are willing to defer payments until a subsequent year. Implicit taxes in the form of higher prices will remove any benefits to this strategy. If businesses are able to immediately deduct the cost of assets purchased under an installment contract, however, an acceleration strategy will be effective because buyers can obtain a deduction in a tax year before sellers recognize the related ine. While the Hall–Rabushka proposal does not directly address this issue, Doernberg (1985) suggests that the flat tax system allows buyers to deduct the entire cost of property purchased