Last visit was: 17 Jul 2024, 06:10 It is currently 17 Jul 2024, 06:10
Toolkit
GMAT Club Daily Prep
Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

# Legislator: Recently, the state's small-business association proposed

SORT BY:
Tags:
Show Tags
Hide Tags
Manager
Joined: 17 Oct 2012
Posts: 55
Own Kudos [?]: 548 [40]
Given Kudos: 53
Location: India
Concentration: Strategy, Finance
WE:Information Technology (Computer Software)
Senior Manager
Joined: 05 Nov 2012
Posts: 338
Own Kudos [?]: 4632 [3]
Given Kudos: 606
Concentration: Technology, Other
Manager
Joined: 09 Nov 2012
Status:How easy it is?
Posts: 73
Own Kudos [?]: 415 [0]
Given Kudos: 174
Location: India
Concentration: Operations, General Management
GMAT 1: 650 Q50 V27
GMAT 2: 710 Q49 V37
GPA: 3.5
WE:Operations (Other)
Senior Manager
Joined: 05 Nov 2012
Posts: 338
Own Kudos [?]: 4632 [0]
Given Kudos: 606
Concentration: Technology, Other
nitin6305 wrote:
JarvisR wrote:
Thanks for sharing the questions.
My 2 cents.

Premise:
Legislator: Recently, the state's small-business association proposed a plan to allow small (as defined by law) retail establishments to deduct the cost of unsold inventory from their tax liability.
The association's spokesperson emphasized that, since smaller businesses have less money with which to purchase inventory, the proposed measure would help those smaller retailers remain competitive with their larger counterparts.
Conclusion:
Nevertheless, in practical terms, fair enforcement of the plan would be in-feasible, because ________.

The whole viability of this proposal depends upon the point that its is possible to make the distinction between unsold inventory and other inventories. If it is not the case, then its SB wont be able to reap benefit from it.

PS: IMO this shall be a strengthen question as we r looking for an option that supports author's conclusion.

(A) several new state employees would have to be hired to audit the new deductions
>>Hiring new emp doesn't help in evaluating fair enforcement of the plan.
(B) it is not possible to distinguish unsold inventory from the store proprietors' personal purchases
>>Correct.

(C) stores would have to repay the deducted amount of tax if they sold the inventory in question at a later date
>>Opposite of wht we r looking for.
(D) the threshold of sales below which a business legally qualifies legally as "small" was set by the state legislature in response to a different proposal
>>Not relevant.
(E) small businesses are less likely than their larger counterparts to have computerized or otherwise automated inventory systems
>>Not relevant.

I don't think that the issue is whether Small Business will be able to reap benefit. The issue IMO is the fair enforcement of plan. The Government will not allow such a policy to be passed where some people can take undue advantage because of underlying loopholes (not possible to distinguish unsold inventory from the store proprietors' personal purchases).

Hey nitin6305,
How r u?
I don't think that the issue is whether Small Business will be able to reap benefit. The issue IMO is the fair enforcement of plan.
>> I agree that's true. Its the main conclusion of arg. (as I mentioned in my post)
Sometimes while typing the solution, I just type my rephrased version of the statements from the arg.
However, IMO as long as we can mark correct assumption and conclusion from the argument, that should be fine. How we rephrase something shouldn't impact the selection of correct answer.
Anyways, thank you for pointing it out.I have edited it in my original post for clarity sake.
Regards.
Intern
Joined: 24 Sep 2016
Posts: 20
Own Kudos [?]: 36 [0]
Given Kudos: 23
nitin6305 wrote:
JarvisR wrote:
Thanks for sharing the questions.
My 2 cents.

Premise:
Legislator: Recently, the state's small-business association proposed a plan to allow small (as defined by law) retail establishments to deduct the cost of unsold inventory from their tax liability.
The association's spokesperson emphasized that, since smaller businesses have less money with which to purchase inventory, the proposed measure would help those smaller retailers remain competitive with their larger counterparts.
Conclusion:
Nevertheless, in practical terms, fair enforcement of the plan would be in-feasible, because ________.

The whole viability of this proposal depends upon the point that its is possible to make the distinction between unsold inventory and other inventories. If it is not the case, then its SB wont be able to reap benefit from it.

PS: IMO this shall be a strengthen question as we r looking for an option that supports author's conclusion.

(A) several new state employees would have to be hired to audit the new deductions
>>Hiring new emp doesn't help in evaluating fair enforcement of the plan.
(B) it is not possible to distinguish unsold inventory from the store proprietors' personal purchases
>>Correct.

(C) stores would have to repay the deducted amount of tax if they sold the inventory in question at a later date
>>Opposite of wht we r looking for.
(D) the threshold of sales below which a business legally qualifies legally as "small" was set by the state legislature in response to a different proposal
>>Not relevant.
(E) small businesses are less likely than their larger counterparts to have computerized or otherwise automated inventory systems
>>Not relevant.

I don't think that the issue is whether Small Business will be able to reap benefit. The issue IMO is the fair enforcement of plan. The Government will not allow such a policy to be passed where some people can take undue advantage because of underlying loopholes (not possible to distinguish unsold inventory from the store proprietors' personal purchases).

I did not understand how you have reached that assumption?
Can you please explain more clearly??
SVP
Joined: 14 Dec 2013
Posts: 2402
Own Kudos [?]: 15324 [1]
Given Kudos: 26
Location: Germany
Schools:
GMAT 1: 780 Q50 V47
WE:Corporate Finance (Pharmaceuticals and Biotech)
1
Kudos
emmafoster wrote:
nitin6305 wrote:
JarvisR wrote:
Thanks for sharing the questions.
My 2 cents.

Premise:
Legislator: Recently, the state's small-business association proposed a plan to allow small (as defined by law) retail establishments to deduct the cost of unsold inventory from their tax liability.
The association's spokesperson emphasized that, since smaller businesses have less money with which to purchase inventory, the proposed measure would help those smaller retailers remain competitive with their larger counterparts.
Conclusion:
Nevertheless, in practical terms, fair enforcement of the plan would be in-feasible, because ________.

The whole viability of this proposal depends upon the point that its is possible to make the distinction between unsold inventory and other inventories. If it is not the case, then its SB wont be able to reap benefit from it.

PS: IMO this shall be a strengthen question as we r looking for an option that supports author's conclusion.

(A) several new state employees would have to be hired to audit the new deductions
>>Hiring new emp doesn't help in evaluating fair enforcement of the plan.
(B) it is not possible to distinguish unsold inventory from the store proprietors' personal purchases
>>Correct.

(C) stores would have to repay the deducted amount of tax if they sold the inventory in question at a later date
>>Opposite of wht we r looking for.
(D) the threshold of sales below which a business legally qualifies legally as "small" was set by the state legislature in response to a different proposal
>>Not relevant.
(E) small businesses are less likely than their larger counterparts to have computerized or otherwise automated inventory systems
>>Not relevant.

I don't think that the issue is whether Small Business will be able to reap benefit. The issue IMO is the fair enforcement of plan. The Government will not allow such a policy to be passed where some people can take undue advantage because of underlying loopholes (not possible to distinguish unsold inventory from the store proprietors' personal purchases).

I did not understand how you have reached that assumption?
Can you please explain more clearly??

This is not an assumption question, but an explain question. WHY fair enforcement is not feasible?
BECAUSE it is not possible to differentiate unsold inventory from owner's personal purchase - If it cannot be determined whether an item is an unsold inventory or a personal property of the owner, then it would not be possible to determine whether to exempt the item from tax liability.
Director
Joined: 02 Sep 2016
Posts: 525
Own Kudos [?]: 195 [0]
Given Kudos: 277
Legislator: Recently, the state's small-business association proposed a plan to allow small (as defined by law) retail establishments to deduct the cost of unsold inventory from their tax liability. The association's spokesperson emphasized that, since smaller businesses have less money with which to purchase inventory, the proposed measure would help those smaller retailers remain competitive with their larger counterparts. Nevertheless, in practical terms, fair enforcement of the plan would be infeasible, because ________.

Well !! This question is a Fill in the blank assumption question and there is a blank after indicator word BECAUSE which means we have to explain the reason as to why the enforcement of the plan would be infeasible ?
Here the conclusion is: fair enforcement of the plan would be infeasible
Premise:
- PLAN PROPOSES TO ALLOW SME TO DEDUCT COST OF UNSOLD INVENTORY
- SMALL BUSINESSES HAVE LESS MONEY AND BENEFICIAL FOR THEM TO STAY IN THE COMPETITION
Practically this plan is not sound. There can be few reasons for this:
1) SME could misuse this power
2) Some businesses could show that they have less money to purchase inventory
Let’s now take a look at the choices
(A) several new state employees would have to be hired to audit the new deductions
This choice is OUT OF SCOPE and does not tell us as to why the plan would be infeasible.

(B) it is not possible to distinguish unsold inventory from the store proprietors' personal purchases
This is the correct choice as stated in our pre-thinking. If it is not possible to distinguish unsold inventory from the personal purchases, then the conclusion is strengthened and thus the plan is not feasible as stated. Even if
we negate this statement, it confirms our selection.
Negated statement: It is POSSIBLE to distinguish unsold inventory from the store proprietor’s personal purchases. If this is so the VERY GOOD. OUR PROBLEM AS STATED IN PRE-THINKING IS SOLVED AND WE CAN IMPLEMENT THE PLAN. BUT WAIT!! The conclusion shatters.

(C) stores would have to repay the deducted amount of tax if they sold the inventory in question at a later date
INCORRECT and does not explain the reason behind the main purpose of this question

(D) the threshold of sales below which a business legally qualifies as "small" was set by the state legislature in response to a different proposal
OUT OF SCOPE

(E) small businesses are less likely than their larger counterparts to have computerized or otherwise automated inventory systems
OUT OF SCOPE
Retired Moderator
Joined: 23 Sep 2015
Posts: 1258
Own Kudos [?]: 5693 [0]
Given Kudos: 416
Pre-thinking:
A plan is given and conclusion talks about the infeasiblity of the plan. we have to find out the assumption behind the infeasiblity. We have to look for the options which says that its not possible to implement the plan. - may be outcome will not be good. - May be it will create some mess.

(A) several new state employees would have to be hired to audit the new deductions - out of scope
(B) it is not possible to distinguish unsold inventory from the store proprietors' personal purchases - first on the lines of conclusion. adding to that what if it is possible to distinguish between unsold inventory and the store proprietors' personal purchases. Well in this case one can definitely file tax. conclusion will fall. this must be the choice.
(C) stores would have to repay the deducted amount of tax if they sold the inventory in question at a later date - this choice us also supporting the conclusion.but nigetion is not breaking the conclusion. I stand with B as correct choice.
(D) the threshold of sales below which a business legally qualifies legally as "small" was set by the state legislature in response to a different proposal - already defined in argument(by law) which means this should not be a problem.
(E) small businesses are less likely than their larger counterparts to have computerized or otherwise automated inventory systems --- out of scope.
Intern
Joined: 11 Sep 2017
Posts: 30
Own Kudos [?]: 36 [0]
Given Kudos: 82
Schools: IMD '21
GMAT 1: 740 Q50 V40
I have a doubt with option D
Can we not doubt that this rule will be implied only for small industries and what if its not possible to differentiate accurately between small and large industries.
Choice D slightly points on this particular aspect. Can someone pl explain
Manager
Joined: 08 Feb 2018
Posts: 71
Own Kudos [?]: 18 [0]
Given Kudos: 100
hassu13 wrote:
I have a doubt with option D
Can we not doubt that this rule will be implied only for small industries and what if its not possible to differentiate accurately between small and large industries.
Choice D slightly points on this particular aspect. Can someone pl explain

Hey hassu13,

Out of exposure to various CR questions on the forum, I think what you are thinking is right but indirect. In CR questions we are looking for answers which can directly answer the question asked without having any further gaps because the argument itself has a gap already. An answer must be airtight as most of the experts pitch it. There should not be more assumptions made after selecting the answer choice for the argument to be valid or to hold.
Intern
Joined: 20 Mar 2020
Posts: 48
Own Kudos [?]: 8 [0]
Given Kudos: 177
chetan86 wrote:
Legislator: Recently, the state's small-business association proposed a plan to allow small (as defined by law) retail establishments to deduct the cost of unsold inventory from their tax liability. The association's spokesperson emphasized that, since smaller businesses have less money with which to purchase inventory, the proposed measure would help those smaller retailers remain competitive with their larger counterparts. Nevertheless, in practical terms, fair enforcement of the plan would be infeasible, because ________.

(A) several new state employees would have to be hired to audit the new deductions
(B) it is not possible to distinguish unsold inventory from the store proprietors' personal purchases
(C) stores would have to repay the deducted amount of tax if they sold the inventory in question at a later date
(D) the threshold of sales below which a business legally qualifies legally as "small" was set by the state legislature in response to a different proposal
(E) small businesses are less likely than their larger counterparts to have computerized or otherwise automated inventory systems

I have a doubt because of which I am not able to understand the proposal correctly:
Profit = Revenue (Sales) - Expenses (Costs), and taxes are given on profits. So, costs of unsold inventory is anyways deducted while calculation, and then the tax is computed on the net profit. Now, are we saying that we will further deduct cost of unsold inventory from the tax. Does that not lead to duplicate deduction?
Intern
Joined: 21 Feb 2020
Posts: 26
Own Kudos [?]: 2 [0]
Given Kudos: 43
If b was not one of the choises, is there a world where "a" could be the correct answer? Or is it just to weak?
Manager
Joined: 23 Oct 2020
Posts: 147
Own Kudos [?]: 4 [0]
Given Kudos: 63
GMAT 1: 710 Q49 V38
Hi AndrewN

What is wrong with C ? If the stores have to pay the deducted amount of tax at a later stage, wouldn't that render the plan infeasible too ?
Volunteer Expert
Joined: 16 May 2019
Posts: 3507
Own Kudos [?]: 6979 [2]
Given Kudos: 500
2
Kudos
Namangupta1997 wrote:
Hi AndrewN

What is wrong with C ? If the stores have to pay the deducted amount of tax at a later stage, wouldn't that render the plan infeasible too ?

Hello, Namangupta1997. Notice that whatever fits in the blank has to provide a reason that fair enforcement of the plan would be infeasible. The plan is to some extent designed to create parity between small and large businesses, to give small businesses a way to remain competitive with their larger counterparts, so we want to find some reason to doubt this notion that the playing field will be more equal, with an eye on plan enforcement. Answer choice (C) allows small businesses to defer tax liability, thereby freeing up some cash for the time being, undoubtedly one of the benefits of the proposed plan. However, taxes will eventually be due once the small businesses have sold their items in inventory, so small businesses are not exactly dodging taxes altogether, and we have no reason to believe that enforcement of the plan will be infeasible. The process actually seems straightforward to me: defer taxes, sell items, pay taxes on those items later.

Answer choice (B), on the other hand, drives at the impracticality of enforcing the proposed plan, just what we are looking to do, since, if it is impossible for the IRS or other taxing body to tell the difference between business and personal expenses, small business owners could take advantage of the plan and not pay taxes on items they should. Rather than create a fair competitive landscape between small and large businesses, the plan now seems to provide an unfair advantage to small business owners (at least unscrupulous ones). It may not be the one and only answer that could work in this scenario, but it is the best of the five options presented.

Thank you for thinking to ask.

- Andrew
DI Forum Moderator
Joined: 05 May 2019
Status:GMAT Club Team member
Affiliations: GMAT Club
Posts: 998
Own Kudos [?]: 737 [0]
Given Kudos: 1003
Location: India
GMAT Focus 1:
645 Q82 V81 DI82
GMAT 1: 430 Q31 V19
GMAT 2: 570 Q44 V25
GMAT 3: 660 Q48 V33
GPA: 3.26
WE:Engineering (Manufacturing)
chetan86 wrote:
Legislator: Recently, the state's small-business association proposed a plan to allow small (as defined by law) retail establishments to deduct the cost of unsold inventory from their tax liability. The association's spokesperson emphasized that, since smaller businesses have less money with which to purchase inventory, the proposed measure would help those smaller retailers remain competitive with their larger counterparts. Nevertheless, in practical terms, fair enforcement of the plan would be infeasible, because ________.

It is always better to solve CR questions by using P.O.E. method i.e. Process of Elimination.

TYPE- PLAN & GOAL
PLAN- Allow Smal RBs to deduct cost of unsold inventory from their Taxes
GOAL-To help keep Small RBs competitive with the Large RBs
Conclusion- "Fair" enforcement is not feasible.

Quote:
(A) several new state employees would have to be hired to audit the new deductions

It could be difficult to hire so many new employees but is this option taking about how fairness will be impacted while enforcing the law? I don't believe so, ELMINATE.

Quote:
(B) it is not possible to distinguish unsold inventory from the store proprietors' personal purchases

If it is not possible to distinguish between unsold and what a store purchased for its' own consumption, then this can impact the "fairness" aspect during the implementation of the proposed plan because a store can cheat and report its' personal consumption inventory as an unsold one in order to maximize Tax deductions. HOLD.

Quote:
(C) stores would have to repay the deducted amount of tax if they sold the inventory in question at a later date

Ya so what? This additional step may lead to a little inconvenience to the store owners or may delay the tax collection drive, but this option is not talking about our concern i.e. Can the proposed plan be implemented fairly? ELMINATE.

Quote:
(D) the threshold of sales below which a business legally qualifies legally as "small" was set by the state legislature in response to a different proposal

The legality of a Small RBs is not our pain point. ELMINATE.

Quote:
(E) small businesses are less likely than their larger counterparts to have computerized or otherwise automated inventory systems

Our point of concern is not how quickly one can manage the inventory. ELMINATE.

Left with Option B.
Non-Human User
Joined: 01 Oct 2013
Posts: 17502
Own Kudos [?]: 868 [0]
Given Kudos: 0