Maxims Of Income Tax Planning

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Questions Bank

Taxes and Taxing Jurisdictions
Policy Standards for a Good Tax
Taxes as Transaction Costs
Maxims of Income Tax Planning
Tax Research
Taxable Income from Business Operations
Property Acquisitions and Cost Recovery Deductions
Property Dispositions
Nontaxable Exchanges
Sole Proprietorships
The Corporate Taxpayer
The Choice of Business Entity
Jurisdictional Issues in Business Taxation
The Individual Tax Formula
Compensation and Retirement Planning
Investment and Personal Financial Planning
Tax Consequences of Personal Activities
The Tax Compliance Process

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Question 1

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The goal of tax planning is to reduce tax costs or increase tax savings as much as possible.

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Question 2

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Tax avoidance is the reduction of a person's tax liability through illegal means.

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Question 3

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Tax evasion is a federal crime punishable by imprisonment.

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Question 4

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The tax law applies uniformly to every commercial transaction by every business entity.

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Question 5

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Planning opportunities are created when the tax law applies differentially to alternative business transactions.

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Question 6

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Corporations, LLCs, and partnerships are all taxable entities.

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Question 7

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In the United States, individuals and corporations are the two entities that pay tax on business income.

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Question 8

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The entity variable is important because the amount of taxable income generated by a business depends on the type of entity conducting the business.

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Question 9

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Both the individual and the corporate federal income tax rates are progressive.

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Question 10

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The after-tax value of a dollar of income to a high-tax entity is more than the after-tax value to a low-tax entity.

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Question 11

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The after-tax cost of a dollar of deductible expense to a high-tax entity is less than the after-tax cost to a low-tax entity.

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Question 12

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Income-shifting transactions occur more frequently between related parties than between unrelated parties.

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Question 13

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Deduction-shifting transactions usually occur between unrelated taxpayers.

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Question 14

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According to the assignment of income doctrine, income must be taxed to the person receiving the cash from an income-generating transaction.

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Question 15

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The assignment of income doctrine constrains tax deferral strategies.

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Question 16

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Andrea Mitchell can shift income to her daughter, Lynn, by endorsing a check for $10,000 received for a client over to Lynn.

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Question 17

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The time period variable is based on the time value of money.

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Question 18

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A strategy to shift income from one taxpayer to a different taxpayer reflects the entity variable, while a strategy to shift income from one year to a different year reflects the time period variable.

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Question 19

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A planning strategy that defers a tax cost without deferring the receipt of before-tax cash flows decreases the NPV of the transaction.

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Question 20

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Opportunity cost refers to the decrease in NPV from a deferral of the receipt of before-tax cash flows.

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