Joe Harry, a cash basis taxpayer, owes $20,000 in tax deductible accounting fees for his business. Assume that it is December 28ᵗʰ and that Joe Harry can avoid any finance charges if he pays the accounting fees by January 10ᵗʰ. Joe Harry's tax rate this year is 30%. His tax rate next year will be 33%. His after-tax rate of return is 8%. When should Joe Harry pay the $20,000 fees and why? Use Exhibit 3.1. (Round discount factor(s) to 3 decimal places.)

Question

Joe Harry, a cash basis taxpayer, owes $20,000 in tax deductible accounting fees for his business. Assume that it is December 28ᵗʰ and that Joe Harry can avoid any finance charges if he pays the accounting fees by January 10ᵗʰ. Joe Harry's tax rate this year is 30%. His tax rate next year will be 33%. His after-tax rate of return is 8%. When should Joe Harry pay the $20,000 fees and why?  Use Exhibit 3.1. (Round discount factor(s) to 3 decimal places.)

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The Answer of Joe Harry, a cash basis taxpayer, owes $20,000 in tax deductible accounting fees for his business. Assume that it is December 28ᵗʰ and that Joe Harry can avoid any finance charges if he pays the accounting fees by January 10ᵗʰ. Joe Harry's tax rate this year is 30%. His tax rate next year will be 33%. His after-tax rate of return is 8%. When should Joe Harry pay the $20,000 fees and why?  Use Exhibit 3.1. (Round discount factor(s) to 3 decimal places.)

Joe Harry, a Cash Basis Taxpayer, Owes $20,000 in Tax