Answer:
a. $1260
b. $652
c. $978
d. No after-tax cost is calculated since it is not deductible.
Details of Remaining Part of the Question
The following are payments that were supposed to be listed for the question:
a. $2000 payment for next year's property taxes on her place of business.
b. $800 to reimburse the cost of meals incurred by employees while traveling for the business.
c. $1200 for football tickets to entertain out-of-town clients during contract negotiations.
d. $500 contribution to the mayor's re-election campaign
Step-by-step explanation:
Calculation of after tax cost equation
a. After tax cost = Payment Due × (1 - Marginal rate)
After tax cost = $2000×(1 - 0.37) = $1260
After tax cost for Sarah is $1260. Since it is property tax, the entire amount will be tax deductible according to the 12 month rule.
b. Calculation of after tax cost equation for reimbursement
After tax cost = Reimbursement cost × (1 - (Reduction on meals×Marginal rate))
After tax cost = $800×(1 - (0.5×0.37)) = $652
Only half the cost of meals is deductible.
c. Calculation of after tax cost equation for Football ticket
After tax cost = Football ticket cost × (1 - (Tax exemption×Marginal rate))
After tax cost = $1200×(1 - (0.5×0.37)) = $978.
Only half the cost of entertainment is deductible.
d. Since the cost here is not directly related with the business, this will not be tax deductible. So the $500 contribution to the mayor's re-election campaign is not tax deductible, therefore no after-tax cost is calculated.