The Allowance of Deductions in Calculating Taxable Income and the Use

question 80

Multiple Choice

The allowance of deductions in calculating taxable income and the use of a progressive tax rate structure are a direct application of the

• A)Ability to Pay Concept.
• B)Administrative Convenience Concept.
• C)Arm's-Length Transaction Concept.
• D)Capital Recovery Concept.
• E)Pay-as-You-Go Concept.

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Definitions:

Market Rate

The prevailing interest rate available in the marketplace for loans or deposits of a specific maturity.

Contractual Interest Rate

The interest rate specified in a loan agreement or bond indenture.

Issued Discount

A reduction from the nominal or face value of a security at the time it is issued.

Amortization

Amortization is the process of spreading out a loan into a series of fixed payments over time, or gradually writting off the initial cost of an intangible asset.