The controller of Little Company Ltd. has decided to sell a piece of capital equipment after the company's year-end in order to avoid paying tax on capital gains this year. The controller is engaging in
A) tax avoidance.
B) tax evasion.
C)tax planning.
D) GAAR.

Question

Quizplus · Accepted Answer

The controller is engaging in tax planning, which is the legitimate practice of arranging financial affairs in such a way as to minimize tax liability. Tax avoidance involves exploiting loopholes and technicalities to pay less tax than is actually owed, while tax evasion is the illegal act of not paying taxes that are owed. GAAR stands for General Anti-Avoidance Rule, which is a tax law that enables authorities to counter aggressive tax planning schemes that seek to exploit technicalities and loopholes.

The Controller of Little Company Ltd