Sal, a Calendar Year Taxpayer, Uses the Cash-Basis Method of Accounting

question 83

Essay

Sal, a calendar year taxpayer, uses the cash-basis method of accounting for his sole proprietorship. In late December he performed $40,000 of consulting services for a client. Sal typically requires his clients to pay his bills immediately upon receipt. Assume that Sal's marginal tax rate is 30% this year and 35% next year and that he can earn an after-tax rate of return of 12% on his investments. Should Sal send his client the bill in December or January?

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Definitions:

Diabetic Foot Ulcer

An open sore or wound that occurs in approximately 15% of patients with diabetes, usually on the bottom of the foot.

Dressing Changes

The process of removing old wound dressings and applying new clean dressings to promote healing and prevent infection.

Débrides

The process of removing dead, damaged, or infected tissue to improve the healing potential of the remaining healthy tissue.

Informed Consent

A process by which a patient voluntarily agrees to a proposed medical treatment after being informed of the risks, benefits, and alternatives.