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On the Criterion of the Substantially Lower Tax Basis without Proper Justification
Author(s): 
Pages: 56-59
Year: Issue:  8
Journal: Taxation Research Journal

Keyword:  Tax basisSubstantially lowerProper justificationAssessment of tax payable;
Abstract: Tax authorities can assess the amount of tax payable if the tax basis in the tax return is substantially lower without proper justification. In practice, the market price is the standard reference of whether the tax basis is substantially lower. The market price of goods in question and that of other goods should be comparable. If tax authorities have no more convincing reason, the tax basis declared by the taxpayer can be determined to be substantially lower only if it is lower than 70% of the comparable market price. Tax authorities can firmly believe the taxpayer has proper justification only if the main purpose of taxpayer ’s arrangement is not for tax avoidance and the arrangement is not obviously illegal or unethical.
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