Question

Limitations on certain tax benefits, such as depreciation for luxury automobiles, often decrease or eliminate the benefits of ______ strategies.

A) Tax minimization
B) Tax deferral
C) Tax avoidance
D) Timing

Answer 1

The limitations on certain tax benefits, like depreciation for luxury automobiles, can decrease or eliminate the benefits of tax avoidance strategies.

Step-by-step explanation:

The correct answer is C) Tax avoidance. Limitations on certain tax benefits, such as depreciation for luxury automobiles, often decrease or eliminate the benefits of tax avoidance strategies.

Tax avoidance is the legal practice of minimizing tax liability by utilizing the provisions in the tax code. It involves utilizing legal methods to reduce or eliminate tax obligations.

For example, if a company purchases a luxury automobile for business use, they may be able to claim a depreciation expense on their taxes. However, there are certain limitations on the amount that can be deducted for luxury automobiles, which can reduce or eliminate the tax benefits of this strategy.