income spreading

Definition

The practice of reporting income over a period of several years rather than in a single year to avoid being taxed in a higher income bracket. The IRS tax code permits this type of income spreading in certain situations. For example, if a business owner sells a business for $20,000 but receives payments from the buyer in installments of $4,000 per year over a period of 5 years, the income from the sale might be spread over that time period.
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income shares income statement