Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a $59,000 bill from her accountant for consulting services related to her small business. Reese can pay the $59,000 bill anytime before January 30 of next year without penalty. Assume Reese's marginal tax rate is 32 percent this year and 35 percent next year, and that she can earn an after-tax rate of return of 11 percent on her investments. Required: a. What is the after-tax cost if she pays the $59,000 bill in December? b. What is the after-tax cost if she pays the $59,000 bill in January? Use Exhibit 3.1. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. c. Should Reese pay the $59,000 bill in December or January? d. What is the after-tax cost if she expects her marginal tax rate to be 24 percent next year and pays the $59,000 bill in January? Use Exhibit 3.1. Note: Round your answer to the nearest whole dollar amount. e. Should Reese pay the $59,000 bill in December or January if she expects her marginal tax rate to be 32 percent this year and 24 percent next year? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E What is the after-tax cost if she pays the $59,000 bill in December? After-tax cost < Required A Required B >
Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a $59,000 bill from her accountant for consulting services related to her small business. Reese can pay the $59,000 bill anytime before January 30 of next year without penalty. Assume Reese's marginal tax rate is 32 percent this year and 35 percent next year, and that she can earn an after-tax rate of return of 11 percent on her investments. Required: a. What is the after-tax cost if she pays the $59,000 bill in December? b. What is the after-tax cost if she pays the $59,000 bill in January? Use Exhibit 3.1. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. c. Should Reese pay the $59,000 bill in December or January? d. What is the after-tax cost if she expects her marginal tax rate to be 24 percent next year and pays the $59,000 bill in January? Use Exhibit 3.1. Note: Round your answer to the nearest whole dollar amount. e. Should Reese pay the $59,000 bill in December or January if she expects her marginal tax rate to be 32 percent this year and 24 percent next year? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E What is the after-tax cost if she pays the $59,000 bill in December? After-tax cost < Required A Required B >
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter10: Individuals: Income, Deductions, And Credits
Section: Chapter Questions
Problem 22P
Related questions
Question
Transcribed Image Text:Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a
$59,000 bill from her accountant for consulting services related to her small business. Reese can pay the $59,000 bill anytime before
January 30 of next year without penalty. Assume Reese's marginal tax rate is 32 percent this year and 35 percent next year, and that
she can earn an after-tax rate of return of 11 percent on her investments.
Required:
a. What is the after-tax cost if she pays the $59,000 bill in December?
b. What is the after-tax cost if she pays the $59,000 bill in January? Use Exhibit 3.1.
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
c. Should Reese pay the $59,000 bill in December or January?
d. What is the after-tax cost if she expects her marginal tax rate to be 24 percent next year and pays the $59,000 bill in January? Use
Exhibit 3.1.
Note: Round your answer to the nearest whole dollar amount.
e. Should Reese pay the $59,000 bill in December or January if she expects her marginal tax rate to be 32 percent this year and 24
percent next year?
Complete this question by entering your answers in the tabs below.
Required A Required B Required C
Required D
Required E
What is the after-tax cost if she pays the $59,000 bill in December?
After-tax cost
< Required A
Required B >
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