Direct Tax: Laws and Practice - Week 15 - Tax Planning
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Questions and Answers

What is the primary purpose of tax planning?

  • To avoid tax filing
  • To maximize tax liability
  • To ensure tax efficiency (correct)
  • To claim illegal deductions

What is the key difference between tax avoidance and tax evasion?

  • Tax avoidance is illegal, while tax evasion is legal
  • Tax avoidance is legal, while tax evasion is illegal (correct)
  • Tax avoidance is for businesses, while tax evasion is for individuals
  • Tax avoidance is for individuals, while tax evasion is for businesses

What is an example of tax avoidance?

  • Claiming false deductions
  • Underreporting income
  • Contributing to employer-sponsored retirement plans with pre-tax funds (correct)
  • Filing false tax returns

What is a consideration in tax planning?

<p>Timing of income and purchases (C)</p> Signup and view all the answers

What is the outcome of effective tax planning?

<p>All elements of the financial plan working together in the most tax-efficient manner (C)</p> Signup and view all the answers

What is the purpose of claiming deductions and credits in tax planning?

<p>To reduce tax liability (D)</p> Signup and view all the answers

What is the primary objective of tax planning?

<p>To minimize tax liability (A)</p> Signup and view all the answers

What is the main difference between tax planning and tax management?

<p>Tax planning is about minimizing tax liability, while tax management is about compliance (D)</p> Signup and view all the answers

What is the benefit of tax management?

<p>It helps to avoid payment of interest, penalty, and prosecution (B)</p> Signup and view all the answers

What should an individual setting up a new business consider when choosing a location?

<p>The tax rates and incentives offered by the location (A)</p> Signup and view all the answers

What is the purpose of auditing in tax management?

<p>To ensure compliance with tax laws and regulations (A)</p> Signup and view all the answers

What is the consequence of failing to comply with tax laws and regulations?

<p>All of the above (D)</p> Signup and view all the answers

What is the primary difference between tax avoidance and tax evasion?

<p>Tax evasion involves underreporting income, while tax avoidance involves exploiting legal loopholes (C)</p> Signup and view all the answers

Which of the following is an example of tax evasion?

<p>Claiming illegitimate dependents on a tax return (B)</p> Signup and view all the answers

What is the purpose of tax planning?

<p>To arrange financial data and economic affairs to comply with statutory provisions (D)</p> Signup and view all the answers

What is the consequence of wilfully failing to pay taxes?

<p>Criminal charges and substantial penalties (B)</p> Signup and view all the answers

What is the goal of tax management?

<p>To comply with tax laws and regulations (B)</p> Signup and view all the answers

What is the benefit of retirement plans in terms of taxes?

<p>They allow taxpayers to defer paying taxes until a later date (C)</p> Signup and view all the answers

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