Certain Skills Are Necessary for Successful Tax Planning

question 3

Multiple Choice

Certain skills are necessary for successful tax planning.One of these skills is applying the time value of money.Which of the following is FALSE regarding this skill?

• A)Applying the time value of money is a tool used for wealth accumulation.
• B)If a taxpayer invests $1,000 at 8% and subsequently earns $48 in after-tax income on the investment at the end of the first year, the taxpayer's tax rate is 40%.
• C)If a taxpayer earns an annual return of 12% and is subject to a 40% tax rate, the annual after-tax return is 4.8%.
• D)If a taxpayer invests $1,000 for one year at a rate of return of 14% and is subject to a 45% tax rate, the after-tax value of the investment will be $1,077.

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Definitions:

High Performers

Individuals who consistently exceed the standard expectations and objectives set by their organization through their work performance.

Discrimination

Unfair or prejudicial treatment of individuals based on characteristics such as race, gender, age, or sexual orientation.

Earnings-At-Risk Pay Plan

A compensation plan in which a portion of an employee's earnings is conditional, based on meeting certain performance criteria.

Merit Pay Plan

A compensation strategy designed to reward employees based on their job performance, as opposed to seniority or hours worked.