Practice Quiz

Financial Planner

Category - Tax Planning

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Which of the following is true regarding tax evasion?
  1. The U.S. Supreme Court states that taxpayers should arrange transactions to pay the most tax possible
  2. Using legal means of reducing the taxpayer’s tax liability is considered tax evasion
  3. Taxpayers who lie on their tax returns are rarely caught
  4. Taxpayers found guilty of tax evasion must pay the tax that would otherwise have been due
Explanation
Answer: D - The U.S. Supreme Court recognizes the right of taxpayers to decrease the amount of taxes by means that are permitted by law. Taxpayers who use illegal or dishonest means of avoiding or reducing tax liability are guilty of tax evasion and are required to pay the tax that would have been due if they had legally reported the correct amounts.
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