Dan receives a proportionate nonliquidating distribution

Difficulty: 1 Easy Topic: Timing Strategies; Conversion Strategies Learning Objective: 03-02 Apply the timing strategy and describe its applications and limitations.; 03-05 Apply the conversion strategy, provide examples, and describe its limitations.Bloom’s: Analyze AACSB: Reflective Thinking AICPA: FN Decision Making 15) The timing strategy is particularly effective for cash basis taxpayers.(Spilker) Chapter 3 Tax Planning Strategies and Related Limitations 1) The goal of tax planning is tax minimization.Answer: FALSE Explanation: The goal of tax planning is the maximization of after-tax wealth while achieving the taxpayer’s nontax goals.Difficulty: 1 Easy Topic: Basic Tax Planning Overview Learning Objective: 03-01 Identify the objectives of basic tax planning strategies.Bloom’s: Analyze AACSB: Reflective Thinking AICPA: BB Critical Thinking 2) Nontax factors do not play an important role in tax planning.Difficulty: 2 Medium Topic: Timing Strategies Learning Objective: 03-02 Apply the timing strategy and describe its applications and limitations.Bloom’s: Analyze AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Decision Making 5) In general, tax planners prefer to accelerate deductions.

Answer: FALSE Difficulty: 2 Medium Topic: Conversion Strategies; Additional Limitations to Tax Planning Strategies: Judicial Doctrines Learning Objective: 03-05 Apply the conversion strategy, provide examples, and describe its limitations.; 03-06 Describe basic judicial doctrines that limit tax planning strategies.

Answer: FALSE Difficulty: 1 Easy Topic: Basic Tax Planning Overview Learning Objective: 03-01 Identify the objectives of basic tax planning strategies.

Bloom’s: Analyze AACSB: Reflective Thinking AICPA: BB Critical Thinking 3) Virtually every transaction involves the taxpayer and two other parties that have an interest in the tax ramifications of the transaction.

Bloom’s: Analyze AACSB: Analytical Thinking AICPA: BB Critical Thinking 11) When considering cash inflows, higher present values are preferred.

Answer: TRUE Difficulty: 1 Easy Topic: Timing Strategies Learning Objective: 03-03 Apply the concept of present value to tax planning.

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