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e-GMAT Representative
Joined: 02 Nov 2011
Posts: 1083
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Evaluate 2: Income Tax fraud [#permalink]
 10 Feb 2013, 23:18
Question Stats:
62% (02:07) correct
38% (01:19) wrong based on 2 sessions
Please use the poll above. We will post the OA on Tuesday. To determine the extent of tax fraud, the Internal Revenue Service audited the current year tax returns of a random set of 1000 individuals. Even though only 10% of the individuals in the group were self-employed (other 90% were working professionals), they accounted for 50% of the fraudulent cases. For the group above, which of the following would be most useful in assessing whether tax fraud by self-employed individuals may be responsible for majority of the money that the IRS loses every year? 1. The trend of average income of self-employed individuals over the past few years compared to that of the rest of the group. 2. The difference between average annual taxes paid by a self-employed individual and a working professional. 3. The average tax fraud committed by a self-employed individual versus a working professional. 4. The diversity of demographics represented in the group versus that of the nation. 5. The number of women in the group who were working professionals versus self-employed.
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Last edited by egmat on 15 Feb 2013, 06:46, edited 1 time in total.
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e-GMAT Representative
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Re: Evaluate 2: Income Tax fraud [#permalink]
10 Feb 2013, 23:18
Just added the OA. Will be providing the OE as soon as I come back (in a few hours) Reserved for official explanation Reserved for official explanation
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Last edited by egmat on 15 Feb 2013, 06:46, edited 1 time in total.
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Re: Evaluate 2: Income Tax fraud [#permalink]
11 Feb 2013, 06:18
Premise :- 10% of self employed accounted for 50% of the fraudulent cases.
total frauds - 200, 100 - self employed, 100 - working professionals
money lost from 100 self employed > money lost from 100 working professionals.
Based on the premise we can assume that average money lost from self employed > average money lost from working professional
Conclusion(for sake of evaluation) :- Tax fraud by self employed is responsible for majority of loss in money
POE :-
A. This option talks about income levels - OFS
B. This option talks about differences in taxes paid, from this information we will not be able to infer anything about individual unpaid taxes - OFS
C. This is the correct answer, it talks about the fraud levels committed by each. a Yes/No answer will take the conclusion to the extreme choices.
D. Diversity of demographics - OFS
E. Number of women - OFS
IMO :- C
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Re: Evaluate 2: Income Tax fraud [#permalink]
11 Feb 2013, 06:27
b in my opinion ,quantum of loss may or may not be related to the number of tax frauds,50% may contribute to 10% of loss to irs and 10% may contribute 90% of loss...
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Intern
Joined: 01 Feb 2012
Posts: 16
Location: United States
Concentration: Finance, Strategy
GMAT 1: 640 Q49 V28
GMAT 2: 670 Q47 V35
GPA: 3.75
WE: Corporate Finance (Health Care)
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Re: Evaluate 2: Income Tax fraud [#permalink]
11 Feb 2013, 11:02
It should be C.
the number of ppl committing fraud in both groups is same so only the quantum of fraud or average fraud can impact the conculsion.
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Intern
Joined: 24 Sep 2012
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Re: RE: Evaluate 2: Income Tax fraud [#permalink]
11 Feb 2013, 20:42
C is the correct option in my opinion
Sent from my Lumia 800 using Board Express
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Intern
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Re: Evaluate 2: Income Tax fraud [#permalink]
11 Feb 2013, 21:32
The question here is which of the following would be most useful in assessing whether tax fraud by self-employed individuals may be responsible for majority of the money that the IRS loses every year? Majority of the money - For this average is not the right representation. (Money - average * total number). Generalization from the 1000 samples may not be applicable. And for that we need the answer for option D). egmat wrote: Please use the poll above. We will post the OA on Tuesday.
To determine the extent of tax fraud, the Internal Revenue Service audited the current year tax returns of a random set of 1000 individuals. Even though only 10% of the individuals in the group were self-employed (other 90% were working professionals), they accounted for 50% of the fraudulent cases.
For the group above, which of the following would be most useful in assessing whether tax fraud by self-employed individuals may be responsible for majority of the money that the IRS loses every year?
1. The trend of average income of self-employed individuals over the past few years compared to that of the rest of the group.
2. The difference between average annual taxes paid by a self-employed individual and a working professional.
3. The average tax fraud committed by a self-employed individual versus a working professional.
4. The diversity of demographics represented in the group versus that of the nation.
5. The number of women in the group who were working professionals versus self-employed.
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Director
Status: Final Lap Up!!!
Affiliations: NYK Line
Joined: 21 Sep 2012
Posts: 918
Location: India
GMAT Date: 05-29-2013
GPA: 3.2
WE: Engineering (Transportation)
Followers: 13
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Re: Evaluate 2: Income Tax fraud [#permalink]
12 Feb 2013, 04:26
I think its C....We need to evaluate whether tax fraud by self employed may be the reason for the majority of the tas fraud. Hence we need to search for an option that establishes the truth of the number of the self employed people investigated. I mean in real scenario there are 3 partners for a single business group but if we see employed person , he is a single entity being questioned...So if all 3 partners are questioned than the single business is reiterated and hence can wrongly influence the survey.
Archit
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Director
Status: Final Lap Up!!!
Affiliations: NYK Line
Joined: 21 Sep 2012
Posts: 918
Location: India
GMAT Date: 05-29-2013
GPA: 3.2
WE: Engineering (Transportation)
Followers: 13
Kudos [?]:
88
[0], given: 55
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Re: Evaluate 2: Income Tax fraud [#permalink]
14 Feb 2013, 02:35
Its thursday already, No OA ........It was supposed to be posted on tuesday.......Pls post OA...
Archit
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Re: Evaluate 2: Income Tax fraud [#permalink]
15 Feb 2013, 03:06
hmmm its friday still no answer.....lets do some critical reasoning about it.why is it so a)they are very busy. b)they have forgotten about the question c)the information about answering on tuesday is a typo these are some of the assumptions i have come up with...hope they explain the answer soon the suspense is killing me 
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e-GMAT Representative
Joined: 02 Nov 2011
Posts: 1083
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Re: Evaluate 2: Income Tax fraud [#permalink]
15 Feb 2013, 06:49
Hi guys, Just provided the OA. will provide the OE soon. -Rajat
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Re: Evaluate 2: Income Tax fraud
[#permalink]
15 Feb 2013, 06:49
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