OG 10- Federal Tax laws

[rah_pandey]

Please solve with proper reasoning....Could not understand the official soln. OA later

A proposed change to federal income tax laws would eliminate deductions from taxable income for donations a taxpayer has made to charitable and educational institutions. If this change were adopted, wealthy individuals would no longer be permitted such deductions. Therefore, many charitable and educational institutions would have to reduce services, and some would have to close their doors.
The argument above assumes which of the following?
(A) Without the incentives offered by federal income tax laws, at least some wealthy individuals would not donate as much money to charitable and educational institutions as they otherwise would have.
(B) Money contributed by individuals who make their donations because of provisions in the federal tax laws provides the only source of funding for many charitable and educational institutions.
(C) The primary reason for not adopting the proposed change in the federal income tax laws cited above is to protect wealthy individuals from having to pay higher taxes.
(D) Wealthy individuals who donate money to charitable and educational institutions are the only individuals who donate money to such institutions.
(E) Income tax laws should be changed to make donations to charitable and educational institutions the only permissible deductions from taxable income.

[cata1yst]

Please solve with proper reasoning....Could not understand the official soln. OA later

A proposed change to federal income tax laws would eliminate deductions from taxable income for donations a taxpayer has made to charitable and educational institutions. If this change were adopted, wealthy individuals would no longer be permitted such deductions. Therefore, many charitable and educational institutions would have to reduce services, and some would have to close their doors.
The argument above assumes which of the following?
(A) Without the incentives offered by federal income tax laws, at least some wealthy individuals would not donate as much money to charitable and educational institutions as they otherwise would have.
(B) Money contributed by individuals who make their donations because of provisions in the federal tax laws provides the only source of funding for many charitable and educational institutions.
(C) The primary reason for not adopting the proposed change in the federal income tax laws cited above is to protect wealthy individuals from having to pay higher taxes.
(D) Wealthy individuals who donate money to charitable and educational institutions are the only individuals who donate money to such institutions.
(E) Income tax laws should be changed to make donations to charitable and educational institutions the only permissible deductions from taxable income.

I will go with A.

If they reduce the tax benefits the author is assuming that wealthy individuals will not donate as much.

[ssmiles08]

IMO A too.

[dendude]

IMO D
Charitable institutions would have to reduce services or close only if their sole benefactors are Wealthy individuals
This is what the argument assumes.

What if there were corporates that made donations and were not affected by this proposed law? Then the argument would not hold.

[cata1yst]

IMO D
Charitable institutions would have to reduce services or close only if their sole benefactors are Wealthy individuals
This is what the argument assumes.

What if there were corporates that made donations and were not affected by this proposed law? Then the argument would not hold.

Now that I look at it again, D does look nice.

[Mayur Sand]

what is the problem with B plz explain

[Domnu]

B is too extreme. D cannot be correct, since it is very possible that members of the middle-class, who may not be considered wealthy, still contribute to the charities, but this money is not enough to drive the charities to continue.

I would go with A.

[Domnu]

By the way, here's a site that offers another explanation

https://www.urch.com/forums/gmat-critica ... -laws.html

Cheers!

[bblast]

I am still not convinced why B and D are wrong.

[cans]

IMO A
I eliminated D because even if only wealthy individuals donate money, we are not given any information whether they will donate less after the change in law was adopted.
D requires another assumption with this that wealthy individuals will donate less or not at all as they won't be permitted deductions. which is same as assumption A)
B) if that were the case, all charitable institutions will have to close their doors but as given in argument some would have to reduce services which means they have other source of income also.

[itsmebharat]

@bblast, I too went for D and truly agree D should be correct, but after reading the explanations at the link provided, I guess D is wrong because of following reasons..

(D) Wealthy individuals who donate money to charitable and educational institutions are the only individuals who donate money to such institutions.

"only" is almost always too specific, and is usually a wrong answer. If you're going to choose an "only" answer, MAKE SURE IT'S CORRECT. In other words, if you're not sure, don't choose an "only" answer.

Now as per argument,
If this change were adopted, wealthy individuals would no longer be permitted such deductions. Therefore, many charitable and educational institutions would have to reduce services, and some would have to close their doors.

Hope that helps...