In 2019, Bob will sell land that he bought in 2009 for $50,000 to Tom. ‘The selling price is $250,000. Tom has given Bob two options for the sale. Under option 1, Bob would receive the $250,000 at the date of sale. Under option 2, Bob would receive

$125,000 at sale date and $125,000 one year later (in 2020). Tom also would pay Bob $8,750 interest in 2020 (at the time he pays the remaining $125,000 to Bob).

Bob’s overall tax rate is 35% and the land is a capital asset to Bob. Bob's capital gain tax rate is 15%. Bob uses a 5% after-tax discount rate for all his investment decisions.

Which option should Bob take?

a. Option 1

b. Option 2

c. Neither, Bob is indifferent