you move revenue and expenses around in time to arrive at the income level you desire for a given time period using a variety of mechanisms: revenue recognition

you move revenue and expenses around in time to arrive at the income level you desire for a given time period using a variety of mechanisms: revenue recognition, IP transfer, capitalization, cost accounting, bonuses, transfer pricing, accelerated depreciation, etc. that's the whole point of tax advisors/accountants. you'll need to explain how it's "incredibly stupid". you allude to one of the potential consequences being differential taxation (which you didn't explain very well; but yes, losses in some taxing periods could mean you pay more in overall tax for the same total income over many tax periods). that's part of the "more complicated than it sounds" caveat in my prior post. but unlike you, i don't think it's all bad. for one, it would disincentivize excessive risk-taking (which lead to losses). and it would better align incentives between managers, owners and employees: it would be harder for executives to inflate income in one quarter and recognize the losses in another for the purpose of realizing undeserved bonuses for themselves. would that be so bad? (besides, it's already the norm that companies have variable income and pay different amounts of tax over a given period of time for the same overall income--e.g., the apple imbroglio).