The Business Purpose Concept means
I.that the economic purpose of the transaction must exceed the tax avoidance motive.
II.that the taxpayer's dominant motive for an expenditure is to reduce taxation.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

The Business Purpose Concept means
I.that the economic purpose of the transaction must exceed the tax avoidance motive.
II.that the taxpayer's dominant motive for an expenditure is to reduce taxation.
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A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

The Business Purpose Concept means that the economic purpose of the transaction must exceed the tax avoidance motive. Therefore, statement I is correct, but statement II is incorrect as it suggests that the taxpayer's dominant motive for an expenditure is to reduce taxation, which is contrary to the Business Purpose Concept.

The Business Purpose Concept Means