Brief Exercise NO: 42

} 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

} 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 any time before January 30 of next year without penalty.  Assume Reese’s marginal tax rate is 30 percent this year and will be 40 percent 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 billthis year or next?

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