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Basics Beginner: The Basics of Tax Planning

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1.
Tax considerations will be the paramount factor in any smart business person's or investor's financial decision-making process.
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False. Tax considerations are important, of course, but should not drive the decision-making process.
2.
How does a contribution to a traditional IRA provide income tax savings?
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Within limits, the contribution is deducted from your taxable income. An IRA contribution is an adjustment to income and thereby provides significant tax savings.
3.
When you take time to engage in tax planning, you can save yourself money you would otherwise pay to the government in taxes.
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True. When you take the time to engage in tax planning, you can save yourself money you would otherwise pay to the government in taxes.
4.
Which of the following statements is true?
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Both the above are true. Postponing income and accelerating deductions are both good tax strategies.
5.
Which of the following statements are true?
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A "pass-through" business entity (e.g., a limited liability company) generally pays no tax itself. The income passes through to the business owners, who pay tax at their own rate potentially after applying a special deduction first.