If he invests more capital in the business to expand production, or hires more workers to increase output, that may result in higher net taxable income.

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And net taxable income would be reduced by issuing dividends.

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But only the net income is currently taxable.

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These people have tax-free bonds because their net yields are better than taxable fixed-income instruments, also taking into account the financial strength of the issuing entities.

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Various costs are subtracted from the revenues to calculate various progressively smaller measures of profit and loss: gross income, net income, EBITDA (earnings before interest, taxes, depreciation and amortization), taxable income, etc.

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This rule can apply where there is a relatively greater amount of indebtedness in the U.S. than offshore, and net interest expense exceeds a specified percentage of adjusted taxable income.

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In a taxable account, net long-term capital gains are taxed at a rate lower than the ordinary income-tax rate for withdrawals from tax-deferred retirement plans.

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