ch03 - ch03 Student 1 The goal of tax planning is tax...

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ch03 Student: ___________________________________________________________________________ 1. The goal of tax planning is tax minimization. True False 2. Nontax factors do not play an important role in tax planning. True False 3. Virtually every transaction involves the taxpayer and two other parties that have an interest in the tax ramifications of the transaction. True False 4. The timing strategy is based on the idea that where income is taxed affects the tax costs of the income. True False 5. In general, tax planners prefer to accelerate deductions. True False 6. The timing strategy is particularly effective for cash basis taxpayers. True False 7. The timing strategy becomes more attractive as tax rates decrease. True False 8. The timing strategy becomes more attractive as interest rates (i.e., rates of return) increase. True False 9. The timing strategy becomes more attractive if a taxpayer is able to accelerate deductions by two or more years (versus one year). True False 10. One limitation of the timing strategy is the difficulties in accelerating a tax deduction without accelerating the actual cash outflow that generates the tax deduction. True False 11. If tax rates will be higher next year, taxpayers should accelerate their deductions regardless of their after- tax rate of return. True False 12. If tax rates will be lower next year, taxpayers should accelerate their deductions regardless of their after- tax rate of return. True False 13. If tax rates will be higher next year, taxpayers should defer their income to next year regardless of their after-tax rate of return. True False 14. The concept of present value is an important part of the timing strategy. True False 15. The value of a tax deduction is higher for a taxpayer with a lower tax rate. True False 16. In general, tax planners prefer to defer income. This is an example of the conversion strategy. True False
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17. The constructive receipt doctrine is more of an issue for cash basis taxpayers. True False 18. The assignment of income doctrine is a natural limitation to the timing strategy. True False 19. Assuming an after-tax rate of return of 10%, John should prefer to pay $85 today instead of $100 in one year. True False 20. The time value of money suggests that $1 in one year is worth less than $1 today. True False 21. The present value concept becomes more important as interest rates increase. True False 22. Future value can be computed as Future Value = Present Value/(1 + r) n . True False 23. When considering cash inflows, higher present values are preferred. True False 24. When considering cash outflows, higher present values are preferred.
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ch03 - ch03 Student 1 The goal of tax planning is tax...

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