The correct answer is B. False. The CFE Manual clearly distinguishes tax evasion from tax avoidance. It explains that tax evasion refers to fraudulent or illegal actions taken to avoid reporting or paying taxes. By contrast, tax avoidance is a legal means of lowering one’s tax bill through legitimate deductions, credits, and shelters. Therefore, if Mary is using lawful deductions and credits to reduce her taxes, she is not committing tax evasion; she is engaging in tax avoidance.
The Manual emphasizes that the major difference between the two concepts is legality and intent. Tax evasion involves wrongful conduct, false reporting, concealment, or intentional misrepresentation. Tax avoidance, on the other hand, involves using lawful provisions of tax rules to reduce liability. The Manual also notes that a person accused of tax crimes may defend themselves by arguing that they were engaged in avoidance, not evasion, when they used legitimate deductions, credits, or shelters.
Because the question specifically says Mary used legal means and legitimate deductions and credits, her conduct falls squarely within the concept of tax avoidance, not evasion. Therefore, the statement is false, and B is the correct answer.
