Question: Each year, Tom and Cindy Bates report itemized deductions of $10,000, including a $4,000 pledge payment to their church. Upon the advice of a friend,

Each year, Tom and Cindy Bates report itemized deductions of $10,000, including a $4,000 pledge payment to their church. Upon the advice of a friend, they do the following: in early January 2014, they pay their 2013 pledge; during 2014, they pay the
2014 pledge; and in late December 2014, they prepay their 2015 pledge.
a. Explain what the Bateses are trying to accomplish.
b. What will be the tax saving if their marginal tax bracket is 25% for all three years? (Assume that the standard deduction amounts for 2014 and 2015 are the same.)
c. Write a letter to Tom and Cindy Bates (8212 Bridle Court, Reston, VA 20194) summarizing your analysis?

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a By concentrating the payment of three years of charitable contributions 2013 2014 and 2015 into one year the Bates will be able to itemize their ded... View full answer

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