Question

The IRS has the authority to adjust upward or downward the gross income and deductions between or among certain organizations to prevent the evasion of taxes or to clearly reflect the income of two or more organizations. Which one of the following is a characteristic of these organizations?

1) They are exempt from paying taxes
2) They are required to disclose their financial information
3) They are not subject to any regulations
4) They are allowed to transfer income between organizations

Answer 1

The IRS can adjust gross income and deductions among organizations that are allowed to transfer income between them in order to prevent tax evasion and accurately reflect income.

Step-by-step explanation:

The Internal Revenue Service (IRS) has the authority to adjust upwards or downwards the gross income and deductions between or among certain organizations to prevent the evasion of taxes or to clearly reflect the income of these organizations. The characteristic of these organizations is that they are allowed to transfer income between organizations. This is done to ensure that the overall economic activity is not distorted by tax avoidance strategies, allowing for a fair tax system where the actual economic performance of interconnected entities is accurately represented.