Practice Quiz

CLEP Business Law

Category - US Legal System

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What is the difference between tax avoidance and tax evasion?

  1. Tax avoidance is permissible by law, whereas, tax evasion is a crime
  2. Tax avoidance is punishable, whereas, tax evasion is allowed
  3. Tax avoidance is manipulation of laws, whereas, tax evasion is lawful
  4. Tax avoidance at a larger level refers to tax evasion
  5. None of the above
Explanation

Answer: A - From a definitional standpoint, tax avoidance is permissible by law, whereas, tax evasion is a crime as per a court of law.  It is important to be knowledgeable about what constitutes tax avoidance and tax evasion. 

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