Based Only on the Information Provided for Each Scenario, Determine

question 119

Essay

Based only on the information provided for each scenario, determine whether Kristi or Cindy will benefit more from using the timing strategy and why there will be a benefit to that person. Use Exhibit 3.1. (Round discount factor(s)to three decimal places.)
a. Kristi has a 40 percent tax rate and can defer $20,000 of income. Cindy has a 30 percent tax rate and can defer $30,000 of income. b. Kristy has a 30 percent tax rate and a 10 percent after-tax rate of return and can defer $25,000 of income for three years. Cindy has a 40 percent tax rate and an 8 percent after-tax rate of return and can defer $20,000 of income for four years..

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Definitions:

Desensitization

The process of reducing sensitivity or responsiveness to a stimulus, often used as a therapeutic approach.

Constancy

Refers to the psychological or physical stability or steadiness in a person or environment.

Monozygotic Twins

Identical twins that develop from a single fertilized egg, sharing identical genetic material.

Dizygotic Twins

Also known as fraternal twins, are siblings that develop from two different eggs fertilized by two different sperm, sharing about 50% of their DNA.