Which of the Following Activities Would Be Considered Tax Avoidance

question 56

Multiple Choice

Which of the following activities would be considered tax avoidance?

• A)increasing your level of charitable contributions in December
• B)selling illegal drugs on the street
• C)underestimating your income that is subject to taxation
• D)failure of a waitress to report all tips earned on the job
• E)buying a house and neglecting to deduct interest payments

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Definitions:

Deadweight Loss

The drop in economic efficiency due to the inability or failure of a good or service to reach its equilibrium state.

Government Revenue

The total income received by the government from taxes, fees, and non-tax sources like government-owned enterprises and foreign aid.

Tax Rate

The share of an individual's or corporation's income that is subject to taxation.

Deadweight Loss

A loss in total economic welfare that occurs when the free market equilibrium for a good or a service is not achieved, typically due to taxes, subsidies, or market controls.