Using the facts from the previous problem, when should Reese pay the bill if she expects her
Question:
Using the facts from the previous problem, when should Reese pay the bill if she expects her marginal tax rate to be 35 percent next year? 24 percent next
year?
Previous Problem:
Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a $20,000 bill from her accountant for consulting services related to her small business. Reese can pay the $20,000 bill anytime before January 30 of next year without penalty.
Assume Reese’s marginal tax rate is 32 percent this year and will be 37 percent next year, and that she can earn an after tax rate of return of 12 percent on her investments. When should she pay the $20,000 bill—this year or next?
Step by Step Answer:
If the tax rate next year is 35 percent instead of 37 percent Option 2 changes as follows Option 1 P...View the full answer
Essentials Of Federal Taxation 2019
ISBN: 9781260190045
10th Edition
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver
