For each of the following situations state whether the


For each of the following situations, state whether the taxpayer's action is tax evasion or tax avoidance.

a. Tom knows that farm rent received in cash or farm produce is income subject to tax. To avoid showing a cash receipt on his records, he rented 50 acres for 5 steers to be raised by the tenant. He used 2 of the steers for food for his family and gave 3 to relatives. Because he did not sell the livestock, he did not report taxable income.

b. Betty applied for and received a Social Security number for Kate, her pet cat. Sur- prised by how easy it was to get a Social Security number, she decided to claim a dependent exemption on her tax return for Kate. Other than being a cat, Kate met all the tests for a dependent.

c. Glen has put money in savings accounts in 50 banks. He knows a bank is not required to report to the IRS interest it pays him that totals less than $10. Because the banks do not report the payments to the IRS, Glen does not show the interest he receives as taxable income. Although Glen's accountant has told him all interest he receives is taxable, Glen insists that the IRS will never know the difference.

d. Bob entered a contract to sell a parcel of land at a $25,000 gain in 2009. To avoid reporting the gain in 2009, he closed the sale and delivered title to the land to the buyers on January 2, 2010.

e. Asha's taxable income for 2010 puts her in the 33% marginal tax bracket. She has decided to purchase new equipment for her business during 2011. A special elec- tion allows Asha to treat the $25,000 of the cost of the equipment as a current period expense. Because she expects to be in a lower tax bracket next year, Asha buys and begins using $25,000 worth of the equipment during December 2010. She claims a $25,000 expense deduction under the special election for 2010.

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Accounting Basics: For each of the following situations state whether the
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