In 2019, Godfrey Received a $50,000 Sales Commission on a Long-Term

question 81

Multiple Choice

In 2019, Godfrey received a $50,000 sales commission on a long-term contract.But in 2020, the customer filed for bankruptcy and his employer was not able to collect from the customer.Under the bonus agreement, Godfrey was required to repay the employer $20,000 of the bonus.Godfrey was in the 35% marginal tax bracket in 2019 but he is in the 24% marginal tax bracket in 2020.

• A)Godfrey can amend his 2019 tax return and reduce his taxable income by $20,000.
• B)Godfrey should deduct the $20,000 paid in 2020 and thus his tax savings will be $4,800.
• C)Godfrey can reduce his 2020 tax liability by 35% × $20,000 = $7,000.
• D)Godfrey should not have reported the income in 2019 because of the contingencies.
• E)None of these.

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Definitions:

Cookie Dough

A blend of ingredients like flour, sugar, eggs, and butter designed to be baked into cookies, but frequently enjoyed in its raw state as well.

Cost of Underselling

The missed revenue or profit when a product is sold for less than its potential market value, often resulting from inaccurate pricing strategies or market undervaluation.

Optimal Level

The most efficient, beneficial, or functional level of performance or operation within a particular context.

Product Availability

The extent to which a product can be purchased at any given time from retailers or suppliers.