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Action taken by a taxpayer to legally minimize the amount of tax he pays, i.e., to legally avoid situations where taxes can be levied. For example, by using alternative tax rates, methods of computation, methods of reporting, or by refraining from, engaging in, or timing certain activities to avoid increased taxation. See Cross-links: TAX PUBLICATIONS, TAX AVOIDANCE-A CLOSER LOOK, TAX LAW under "Tax Evasion," and "Tax Fraud."
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Tax Planning:
Any procedure of forethought by a taxpayer to facilitate the use of tax avoidance methods applicable to his tax situation.
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Tax Shelter:
Any investment, deduction, or device used to facilitate tax avoidance, e.g., monetary investment in a tax exempt pension plan, energy tax credits, tax free municipal bonds, home mortgage interest deductions, etc.. See Cross-links: FEDERAL TAX FORMS under "Form 8264," and "Form 8271."

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