38. Isabel, 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. Isabel can pay the $20,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and 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?
38. Isabel, 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. Isabel can pay the $20,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and 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?
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter4: Gross Income
Section: Chapter Questions
Problem 5CE
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![38. Isabel, 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. Isabel can pay the $20,000 bill anytime before January 30
of next year without penalty. Assume her marginal tax rate is 37 percent this year and 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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7c9b53fc-822f-4066-83f2-79179579249c%2F79b8a8c0-25a0-42de-8773-44cbae7453cc%2Fkhlwbx_processed.jpeg&w=3840&q=75)
Transcribed Image Text:38. Isabel, 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. Isabel can pay the $20,000 bill anytime before January 30
of next year without penalty. Assume her marginal tax rate is 37 percent this year and 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?
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