Question

Is tax avoidance a legal activity that forms the basis of basic tax planning strategies?

1) True
2) False

Answer 1

Tax avoidance is the legal minimization of tax liability by taking advantage of loopholes or structuring transactions to reduce taxable income.

Step-by-step explanation:

Tax avoidance is the legal minimization of tax liability by taking advantage of loopholes or structuring transactions to reduce taxable income.

It is different from tax evasion, which is illegal and involves intentionally misrepresenting or hiding income to avoid paying taxes. Tax avoidance forms the basis of many basic tax planning strategies as individuals and businesses use legitimate methods to reduce their tax burden.