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As year end approaches, practitioners are scrambling to determine if individual clients should shift income and deductions between this year and next, a task made complicated by uncertainty over 2013 tax rates triggered by the looming EGTRRA sunsets. While planning for individuals takes center stage, C corporations also should decide when and how to shift income and deductions between 2012 and 2013. As a general rule, C corporations will benefit from the deferral of income and the acceleration of deductions just as individuals normally would from year to year if tax rates remained constant. However, corporations don’t have to factor in the prospect of increasing tax rates—the EGTRRA sunsets will not affect corporate rates and there are no serious proposals on the table to raise corporate rates for 2013. Thus, in the typical case, a C corporation will benefit by deferring income to 2013 and/or accelerating deductions into this year.

However, acceleration of income may be advisable in some cases. Take, for example, a corporation subject to the 39% “bubble.” Corporate taxable income between $100,000 and $335,000 is taxed at the rate of 39% to phase out the benefits of the 15% and 25% brackets that cover a corporation’s first $75,000 of taxable income.

Taxable income between $75,000 and $100,000, and between $335,000 and $10 million, is taxed at 34%. Taxable income over $10 million is taxed at 35%, except that there is also a 38% “bubble” that applies to corporate taxable income between $15 million and $18,333,333 to eliminate the benefit of the 34% rate.

Assume a C corporation expects taxable income of about $90,000 for 2012, but expects its income to go well over $100,000 in 2013. Accelerating $10,000 in income from 2013 to 2012 will save about $500 in taxes, since the $10,000 will be taxed at only 34% instead of 39% ($10,000 times 5% equals $500). This represents a return of 14.7% on the $3,400 used to make the early tax payment ($500 divided by $3,400).

Similar considerations apply to situations where the acceleration of income from 2013 into 2012 will prevent the corporation from moving into other higher tax brackets next year, say from the 15% bracket into the 25% bracket, or from the 35% bracket into the 38% “bubble” that applies to corporate taxable income between $15 million and $18,333,333.