Question

Which of the following tax definitions is least accurate? Taxable income is income based on the...

Which of the following tax definitions is least accurate?

Taxable income is income based on the rules of tax authorities

Taxes payable are the amounts due to the government

Pre-tax income is income tax expense divided by one minus the statutory rate

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Answer #1

given statement about pre tax income is not correct because pre tax income is earning before taxes, and if one is dividing the amount of the taxes by the rate of (1-tax), he will not be getting the desired pretax income.

If pre- tax income is 101, and tax is 10 and the rate of taxes is 10%. Then according to this statement, 10/(1-.9) =10/.9%= 111.11 which is not equal to pre tax income.

Other two statement about taxable income and tax payable are correct.

Correct answer is option ( C).

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