Explain kimos marginal tax rate

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Kimo Corporation, a cash basis calendar-year taxpayer, is in the 25 percent marginal tax bracket this year. Kimo owes a $15,000 expense that it may pay before the end of this year or in January of next year.

a. If it expects its marginal tax rate to be 25 percent next year, should it pay the expense this year or next? Use a 7 percent discount factor to explain your answer.

b. How would your answer change if Kimo's marginal tax rate next year is only 15 percent? Explain.

c. How would your answer change if Kimo's marginal tax rate next year is 34 percent? Explain.

Reference no: EM13518291

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