Kelsey Is a Cash-Basis,calendar-Year Taxpayer

question 17

Essay

Kelsey is a cash-basis,calendar-year taxpayer.Her salary is $30,000,and she is single.She plans to purchase a residence in 2016.She anticipates her property taxes and interest will total $8,000 in 2016.Each year,Kelsey contributes approximately $1,500 to charity.Her other itemized deductions total $2,000.For purposes of this problem,assume 2016 tax rates,exemptions,and standard deductions are the same as 2015.
a.What will her gross tax be in 2015 and 2016 if she contributes $1,500 to charity in each year?
b.What will her gross tax be in 2015 and 2016 if she contributes $3,000 to charity in 2015 but makes no contribution in 2016?
c.What will her gross tax be in 2015 and 2016 if she makes no contribution in 2015 but contributes $3,000 to charity in 2016?
d.Why does alternative "c" yield the lowest tax?

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