Question

If tax rates will be higher next year, should taxpayers defer their income to next year regardless of their after-tax rate of return?

1) Yes, because deferring income will result in lower taxes next year.
2) No, because taxpayers should consider their after-tax rate of return before deciding to defer income.
3) Cannot be determined based on the given information.

Answer 1

No, because taxpayers should consider their after-tax rate of return before deciding to defer income. The correct answer is option 2).

Step-by-step explanation:

Answer:

The correct answer is option 2) No, because taxpayers should consider their after-tax rate of return before deciding to defer income.

When tax rates are expected to be higher next year, taxpayers may consider deferring their income to next year to benefit from lower taxes. However, it is crucial for taxpayers to consider their after-tax rate of return before making this decision. If the after-tax rate of return is higher if the income is received this year and taxed at the current rates, it may be more beneficial for taxpayers to not defer their income.