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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A racial or ethnic group in the United States with ancestry primarily from sub-Saharan Africa.

College Degree

A form of educational attainment that represents completion of a specified level of study at a college or university.