Which Statement Is Correct

question 1

Multiple Choice

Which statement is correct?

• A)The income tax system treats income and losses symmetrically.
• B)The income tax system treats income and losses asymmetrically.
• C)When a company has a loss, a refund is received equal to the loss multiplied by the tax rate.
• D)A loss carryforward has immediate cash flow benefits to a company.

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Definitions:

Tax Shifting

The transfer of the burden of a tax from the entity legally responsible for paying it to another party, often consumers, through higher prices.

Tax Evasion

The illegal practice of not paying taxes by not reporting income, reporting expenses not legally allowed, or by not paying taxes owed.

Corporate Profits Tax

A tax imposed on the income or profit earned by corporations.

Equilibrium

A state of balance or stability within a system, where all forces acting upon the system are equal and opposite, leading to no net change.