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

Question

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

JarvisR · Answer

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 ________. Assumption: The whole viability of this proposal depends upon the point that its is possible to make the distinction between unsold inventory and other inventories. 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.

nitin6305 · Answer

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).

JarvisR · Answer

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.

ela4490 · Answer

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

sayantanc2k · Answer

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.

Shiv2016 · Answer

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

aragonn · Answer

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.

hassu13 · Answer

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

akshaykotha · Answer

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.

thecoronafever · Answer

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?

HansJK · Answer

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?

Namangupta1997 · Answer

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 ?

AndrewN · Answer

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

BottomJee · Answer

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. 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. 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. 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. The legality of a Small RBs is not our pain point. ELMINATE. Our point of concern is not how quickly one can manage the inventory. ELMINATE. Left with Option B.

VerbalBot · Answer

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

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