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Which of the following, if true, is the most logical [#permalink]
05 Apr 2011, 21:41
70% (02:59) correct
30% (01:18) wrong based on 10 sessions
Which of the following, if true, is the most logical completion of the argument below? The tax system of the Republic of Grootland encourages borrowing by granting its taxpayers tax relief for interest paid on loans. The system also discourages saving by taxing any interest earned on savings. Nevertheless, it is clear that Grootland’s tax system does not consistently favor borrowing over saving, for if it did, there would be no______ (A) tax relief in Grootland for those portions of a taxpayer’s income, if any, that are set aside to increase that taxpayer’s total savings (B) tax relief in Grootland for the processing fees that taxpayers pay to lending institutions when obtaining certain kinds of loans (C) tax relief in Grootland for interest that taxpayers are charged on the unpaid balance in credit card accounts (D) taxes due in Grootland on the cash value of gifts received by taxpayers from banks trying to encourage people to open savings accounts (E) taxes due in Grootland on the amount that a taxpayer has invested in interest-bearing savings accounts
Re: tax releif on borrowings and tax on savings [#permalink]
05 Apr 2011, 22:06
The question stem gives examples as to how the tax system apparently favors borrowing over saving by giving tax reliefs on borrowing related money and putting taxes on saving related money. It then goes on to state that this is not consistently so, because _______. Which means we are looking for an option where savings money is getting tax relief or borrowing money is getting taxed.
Option E - implies that there are taxes on money invested in interest-bearing savings accounts- therfore savings money is being taxed. but we are looking for an eception example where savings money is being given some relief fom taation hence ncorrect. D. implies that there are taxes on money (cash value) receievd as encouragemnt for saving. Taxing saving money again- hence incorrect option C Implies that there are tax reliefs on credit card loans- borrowing is being encouraged- this cant be an exception . hence incorrect B implies that there is tax relief on money spent while taking a loan or while borowing- hence encouraging borrowing. incorrect option. A implies that there is tax relief on money that is being saved- thus encouraging savings. Hence only correct option. Answer A