In December 2016,Arnold Is Considering One Last Financial Decision for 2016.He

question 96

Essay

In December 2016,Arnold is considering one last financial decision for 2016.He has $5,000 that he would like to spend before the end of the year.His options include donating the money to a qualified charity (and receiving an itemized deduction)or using the money as a down payment on the purchase of $30,000 of equipment for his business.If he purchases the equipment,he will receive an 8% tax credit for the entire purchase price.He does not need the equipment until early next year,so the purchase at this time is not critical.Assume that Arnold is in the 33% marginal tax rate bracket in 2016 and itemizes his deductions.Which option will provide him with the greatest tax benefit? Explain and show any calculations that support your answer.

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Definitions:

Filler Items

Items included in a questionnaire measure to help disguise the true purpose of the measure.

Automated Procedures

Tasks or operations conducted automatically through the use of technology, software, or machinery, often requiring minimal human intervention.

Experimenter Bias

A form of research bias where the researcher unintentionally influences the results of a study through their expectations or conduct.

Balanced Placebo Design

A balanced placebo design is an experimental approach used to study behavior under the influence of a drug when participants are misinformed about their drug status to remove psychological effects.