Which of the Following Is an Example of Tax Evasion

question 140

Multiple Choice

Which of the following is an example of tax evasion?

• A)Beth invests money in tax exempt municipal bonds instead of corporate bonds.
• B)Bryan uses the cafeteria plan offered by his employer to fund pension plan contributions for his retirement.
• C)Bauregard, a very wealthy 87-year-old individual, gives bonds to each of his grandchildren so that the interest income on them would be taxed at a lower tax rate.
• D)Bertha won $500 cash in an amateur mud-wrestling contest but doesn't report it on her tax return.
• E)All of the above are examples of tax evasion.

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Definitions:

FICA Tax

A U.S. federal payroll tax used to fund Social Security and Medicare, distributed between employees and employers.

FUTA Tax

A United States federal tax levied on employers to fund state workforce agencies and unemployment benefits.

SUTA Tax

State Unemployment Tax Act; a tax that employers are required to pay to the state government to fund unemployment benefits for workers who lose their jobs.

Cumulative Earnings

The total amount of net income earned by a company over its entire existence.