Question

Let's start off the week by looking at items that are considered in tax research. Choose one of the following independent situations and indicate whether the item is generally a tax or a nontax consideration in solving a tax research or tax planning problem. Please include a full explanation as to why you have chosen the way you did and try and choose one that hasn't been done. Once we have worked through these 5, please make up one of your own and ask your classmates what they think.

a. The taxpayer hates to pay Federal taxes. He will take any legal action to avoid paying any Federal income, estate, or gift taxes.
b. The taxpayer does not trust the United States banking system and moves all her money to a bank in Switzerland.
c. The taxpayer is married and his spouse is financially naïve. Since he is in bad health, the taxpayer wants to make sure his wife will be taken care of financially if he were to suddenly die.
d. The taxpayer wants to purchase rental real estate. He wants to make sure that he will not be subject to a high state tax where he buys.
e. The taxpayer owns city of San Diego bonds instead of putting his money in a commercial bank.

Answer 1

Option D is Correct.

Explanation:

_{he wants to purchase a rental real estate to make sure that he was not subject to high state tax where he buys}

_{the reason why I have selected this option is it is a tax planning}

_{I would lie to tell you the difference between the tax planning and tax evasion in tax evasion is done in an informal and fraudulent manner to avoid tax}

_{on the other hand, tax planning is a formal approach by following all laws to reduce the tax burden optimum level}