#1
Which of the following is NOT a tax planning strategy?
Tax Evasion
ExplanationTax Evasion involves illegal means to avoid paying taxes.
#2
What is the primary objective of tax planning?
To minimize tax liability within the boundaries of the law
ExplanationTax planning aims to reduce tax burdens legally.
#3
Which of the following is a characteristic of a tax-deferred investment?
Tax is paid at a later date
ExplanationTax-deferred investments postpone tax payments to a future date.
#4
Which of the following is a tax planning strategy for retirement savings?
Maximizing contributions to retirement accounts
ExplanationMaximizing retirement account contributions reduces taxable income.
#5
Which of the following is NOT a common type of tax deduction?
Post-tax deduction
ExplanationPost-tax deductions do not reduce taxable income.
#6
Which of the following is an example of tax avoidance?
Using legal tax deductions
ExplanationTax avoidance utilizes legal means to decrease tax obligations.
#7
What is the concept of 'tax bracket management' in tax planning?
Shifting income to lower tax brackets
ExplanationManaging income to reduce taxation by falling into lower tax brackets.
#8
What is the purpose of a tax shield in tax planning?
To reduce taxes owed
ExplanationTax shields are used to lessen the amount of taxes payable.
#9
Which of the following is an example of a tax-exempt investment?
Municipal bonds
ExplanationTax-exempt investments like municipal bonds are not subject to certain taxes.
#10
What is the purpose of a tax treaty in international tax planning?
To reduce double taxation between countries
ExplanationTax treaties aim to prevent taxation of the same income in multiple countries.
#11
Which of the following is a limitation of tax planning strategies?
Complex tax laws
ExplanationThe complexity of tax laws can hinder effective tax planning.
#12
What is the difference between tax evasion and tax avoidance?
Tax evasion involves deliberately underpaying taxes, while tax avoidance involves using legal means to reduce taxes owed
ExplanationTax evasion is illegal, while tax avoidance operates within legal boundaries.