Business, 17.02.2022 05:50 inesperezferrere

In 2020, Godfrey received a $50,000 sales commission on a long-term contract. But in 2021, the customer filed for bankruptcy and his employer was not able to collect from the customer. Under the bonus agreement, Godfrey was required to repay the employer $20,000 of the bonus. Godfrey was in the 35% marginal tax bracket in 2020 but he is in the 24% marginal tax bracket in 2021. a. Godfrey should not have reported the income in 2020 because of the contingencies.
b. Godfrey can amend his 2020 tax return and reduce his taxable income by $20,000.
c. Godfrey can reduce his 2021 tax liability by 35% × $20,000 = $7,000.
d. Godfrey should deduct the $20,000 paid in 2021 and thus his tax savings will be $4,800.

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In 2020, Godfrey received a $50,000 sales commission on a long-term contract. But in 2021, the custo...

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