1. Reduce or eliminate taxes.

With this technique, the objective is to receive income in a nontaxable form or to find additional income tax deductions, exemptions, or credits. Some strategies that accomplish this objective include:

• Become familiar with all types of income tax deductions, exemptions, and credits. There are a wide variety available and you should be aware of any that may apply to you.

• Consider municipal bonds, whose interest income is generally not subject to federal, and sometimes state and local, income taxes. This strategy typically becomes more attractive as your marginal tax rate increases. Before purchase, however, compare the municipal bond’s rate of return to your after-tax rate of return on other investments.

• Investigate investments that generate capital gains or dividend income. Capital gains on investments held over one year and qualified dividend income are subject to the 15% capital gains tax rate (5% for individuals in the 10% or 15% tax bracket), compared to the top ordinary income tax rate of 35%. Also, you can typically decide when to sell the investment, giving you some control over the recognition of gains and losses for tax purposes.

• Utilize losses to offset capital gains. Losses on investments can be used to offset capital gains, reducing your total tax bill. Excess losses may be used to offset up to $3,000 of ordinary income, and the unused portion can be carried forward until utilized.

• Sign up for fringe benefits offered by your employer. Many benefits are offered on a tax-free basis, so you should take advantage of all that you can.

• Consider donating appreciated stock held over one year to charitable organizations. You can deduct the stock’s fair market value without paying the capital gains tax on the sale.

2. Postpone the payment of taxes until sometime in the future.

By postponing the payment of taxes, your investment grows on a tax-deferred basis, allowing earnings to compound on the entire balance, including the portion that will eventually be paid in taxes. A secondary benefit is that you may be in a lower tax bracket when the taxes are paid. Some strategies to consider include:

• Contribute to retirement accounts, including employer plans and individual retirement accounts (IRAs). For 2006, you can contribute $15,000 to a 401(k) plan plus a $5,000 catch-up contribution if you are age 50 or older and $4,000 to an IRA plus a $1,000 catch-up contribution if you are age 50 or older. Most provide a tax-advantaged way to save for retirement.

• Designate which shares of stock you are selling. If you are selling a portion of a stock’s shares and have different bases for those shares, designate which shares you are selling.

• Consider selling certain capital assets on the installment basis. You can use this method to sell certain capital assets, particularly real estate, which will typically allow you to recognize the gain as the installments are collected. You may also want to consider a like-kind, or section 1031, exchange, which allows you to defer any tax liability.

3. Shift the tax burden to another individual.

The objective of this technique is to transfer assets to other individuals so any income on those assets becomes taxable to them. Before implementing these strategies, realize that you must typically give up control of the asset. Some strategies to consider include:

• Make annual gifts, up to $12,000 in 2006 or $24,000 if you split the gift with your spouse, to any individual tax free. You can make gifts to any number of individuals. If you make gifts to minor children, be aware of the tax laws regarding investment income for minor children. If your child is under age 18, he/she is subject to the “kiddie tax” — in 2006, the first $850 of investment income is tax free, the second $850 is taxed at the child’s marginal tax rate, and any remaining investment income is taxed at the parents’ marginal tax rate. Thus, you may want to use tax-free or tax-deferred investments for a portion of the child’s assets. If the child is age 18 or older, all investment income is taxed at his/her marginal tax rate.

• Consider using your $1,000,000 lifetime gift tax exclusion during your life. This allows you to shift a much higher amount to heirs than you can with your annual tax-free gifts.

• Gift property that has the potential to appreciate in value, but hasn’t already done so. The tax basis of a lifetime gift remains your original basis plus any gift tax paid. Thus, if you gift an asset with a low basis, your heirs could owe significant capital gains taxes when the asset is sold.

These are just a few of the many tax strategies that can help you reduce your tax burden.