- 1. “The goal of tax planning is to minimize taxes.” Explain why this statement is not true.
Explain the reason for the given statement is not true.
Explanation of Solution
Tax Planning: It is the examining of a financial position or plan from the tax viewpoint. Tax planning makes sure of tax efficiency by reducing the tax liability and increasing the capability to make contribution for retirement plans that are vital for success.
The statement is wrong, because, the goal of tax planning is to maximize tax, not to minimize taxes. In general terms, the goal of tax planning is to maximize the taxpayers’ after tax wealth, while concurrently achieving the taxpayer’s non-tax goals.
Specially, maximizing after tax wealth requires one to consider both the tax and non-tax costs and benefits of other transactions, while tax minimization emphases only on a single tax.
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