Identify the tax issue(s) and ascertain the possible tax consequences of each issue.

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Chapter 4, Problem 71IIP

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Identify the tax issue(s) and ascertain the possible tax consequences of each issue.

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Sarah is a cash-method, calendar-year taxpayer, and she is considering making the following cash payments related to her business. Calculate the after-tax cost of each payment assuming she has a 37 percent marginal tax rate. $2,000 payment for next year’s property taxes on her place of business. $800 to reimburse the cost of meals at restaurants incurred by employees while traveling for the business. $1,200 for football tickets to entertain out-of-town clients during contract negotiations. $500 contribution to the mayor’s reelection campaign.

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.