Based Only on the Information Provided for Each Scenario, Determine

question 91

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.
a. Kristi has a 40% tax rate and can defer $20,000 of income. Cindy has a 30% tax rate and can defer $30,000 of income.
b. Kristy has a 30% tax rate, a 10% after-tax rate of return, and can defer $25,000 of income for three years. Cindy has a 40% tax rate, an 8% after-tax rate of return, and can defer $20,000 of income for four years.

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Definitions:

Correlational Research

A method of research that examines the relationship between two or more variables to determine if a change in one is associated with a change in the other(s).

Cause-and-Effect Relationship

A connection between two events where one is the result of the other or others.

Survey Method

A research technique in which data is collected from a predetermined group of individuals through their responses to questions.

Questionnaires

A set of written questions used for collecting information that is self-reported by the respondent.