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Basics Beginner: The Basics of Tax Planning

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1.
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.
2.
When planning your investments, it is important to recognize that ______.
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There are many sound assets that will increase your wealth over the long haul but which produce little or no current income. Examples include raw land or good growth stocks.
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.
You can lawfully hire your child to work for you or your company, and his or her earnings will be taxed at the child's rate, not yours.
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True. Your child's tax rate on earned income for work done is likely to be lower than yours.
5.
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.