Question: Firm A expects to receive a 25 000 item of income

Firm A expects to receive a $25,000 item of income in August and a second $25,000 item of income in December. The firm could delay the receipt of both items until January. As a result, it would defer the payment of tax on $50,000 income for one full year. Firm A decides to receive the August payment this year (and pay current tax on $25,000 income) but delay the receipt of the December payment. Can you offer an explanation for this decision?

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  • CreatedNovember 03, 2015
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