What are tax loopholes? How do loopholes arise?
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What are tax loopholes? How do loopholes arise? Do you think it is ethical to take advantage of tax loopholes?
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In a cited 610 word solution including several examples, each question is fully answered.
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What are tax loopholes?
Tax loopholes are often inconsistencies in tax law which allows taxpayers to exploit tax law to reduce their personal tax liability. It is not that tax loopholes are illegal but rather than legislators did not think through the consequences of law changes to envision how tax changes might be exploited for personal gain.
Of course, there are those who try to take advantage with the singular purpose of saving income tax, but the intent of any tax law is that there must be a business or viable reason for an action besides just to save tax. The following example cites a silly idea that would probably be denied in an audit:
Getting a 'quickie' divorce before year end in order to save tax and then remarrying at the beginning of the year would be an example of a tax-motivated scam that has the sole purpose of saving tax. It would be hard to explain any other reason for the divorce and ...
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