Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a$29,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $29,000 bill anytime beforeJanuary 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and next year, and that she can earn anafter-tax rate of return of 12 percent on her Investments.Required:a. What is the after-tax cost if Isabel pays the $29,000 bill in December?b. What is the after-tax cost if Isabel pays the $29,000 bill in January? Use Exhibit 3.1.Note: Round your answer to the nearest whole dollar amount.c. Based on requirements a and b, should Isabel pay the $29,000 bill in December or January?

Analyzing after-tax cost for Isabel's payment optionsCash method accounting considers expenses only…

Answered: Isabel, a calendar-year taxpayer, uses…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter4: Income Exclusions

Section: Chapter Questions

Problem 70IIP: In each of the following problems, identify the tax issue(s) posed by the facts presented. Determine...

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How much taxable income should each of the following taxpayers report? a. Kimo builds custom surfboards. During the current year, his total revenues are 90,000, and he incurs 30,000 in expenses. Included in the 30,000 is a 10,000 payment to Kimos five-year-old son for services as an assistant. b. Manu gives hula lessons at a local bar. During the current year, she receives 9,000 in salary and 8,000 in tips. In addition, she engages in illegal behavior, for which she receives 10,000.
Martha is a self-employed tax accountant who drives her car to visit clients on a regular basis. She drives her car 4,000 miles for business and 10,000 for commuting and other personal use. Assuming Martha uses the standard mileage method, how much is her auto expense for the year? Where in her tax return should Martha claim this deduction? _________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________
In each of the following problems, identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify. Ariel has worked for Sander Corporation for 30 years. Sander has a pension plan in which it matches employee contributions by up to 5 percent of the employees salary. Ariel, who is single, retires during the current year when she is 66 years old. Her pension plan contains payments and earnings of 300,000, half of which are attributable to payments made by Ariel and half attributable to payments made by Sander. Under the plan, Ariel is to receive 2,000 per month until she dies.
Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $29,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $29,000 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. Required: a. What is the after-tax cost if Isabel pays the $29,000 bill in December? b. What is the after-tax cost if Isabel pays the $29,000 bill in January? Use Exhibit 3.1. Note: Round your answer to the nearest whole dollar amount. c. Based on requirements a and b, should Isabel pay the $29,000 bill in December or January? Complete this question by entering your answers in the tabs below. Required A Required B After-tax cost Required C What is the after-tax cost if Isabel pays the $29,000 bill in December?
Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $41,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $41,000 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 6 percent on her investments. Required: What is the after-tax cost if Isabel pays the $41,000 bill in December?
Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $44,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $44,000 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 9 percent on her investments. a. What is the after-tax cost if Isabel pays the $44,000 bill in December? After-tax cost b. What is the after-tax cost if Isabel pays the $44,000 bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.) After-tax cost
sabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $41,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $41,000 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 6 percent on her investments. Required: What is the after-tax cost if Isabel pays the $41,000 bill in December? What is the after-tax cost if Isabel pays the $41,000 bill in January? Use Exhibit 3.1. Note: Round your answer to the nearest whole dollar amount. Based on requirements a and b, should Isabel pay the $41,000 bill in December or January?
Jayana, a calendar-year taxpayer, uses the cash method of accounting for a sole proprietorship. In late December Jayana received a $37,000 bill from her accountant for consulting services related to her small business. Jayana can pay the $37,000 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 11 percent on her investments. a. What is the after-tax cost if Jayana pays the $37,000 bill in December? After-tax cost b. What is the after-tax cost if Jayana pays the $37,000 bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.) After-tax cost c. Based on requirements a and b, should Jayana pay the $37,000 bill in December or January? O December O January
Isabel, a calendar year tax payer, uses the cash method of accounting for her soul proprietor ship. In late December she received a $60,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $60,000 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 8 percent on her investments. What is the after-tax cost if Isabel pays the $60,000 bill in January?
Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $22,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume Manny's marginal tax rate is 37 percent this year and next year, and that he can earn an after-tax rate of return of 8 percent on his investments. a. What is the after-tax income if Manny sends his client the bill in December? After-tax income b. What is the after-tax income if Manny sends his client the bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.) After-tax income c. Based on requirements a and b, should Manny send his client the bill in December or January? O December O January
Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a $11,000 bill from her accountant for consulting services related to her small business. Reese can pay the $11,000 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 5 percent on her investments. Required: What is the after-tax cost if she pays the $11,000 bill in December? What is the after-tax cost if she pays the $11,000 bill in January? Use Exhibit 3.1. Note: Round your answer to the nearest whole dollar amount. 3. Based on requirements a and b, should Reese pay the $11,000 bill in December or January? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
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 35 percent next year, and that she can earn an after-tax rate of return of 12 percent on her investments. What is the after-tax cost if she expects her marginal tax rate to be 24 percent next year and pays the $20,000 bill in January? Use Exhibit 3.1. Note: Round your answer to the nearest whole dollar amount. Should Reese pay the $20,000 bill in December or January if she expects her marginal tax rate to be 32 percent this year and 24 percent next year?

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