1. Mrs Flay is employed by HD company. Mrs Flay can receive a $4,000 bonus at year- end from the company or enroll in a qualified medical reimbursement plan that pays up to $4,000 of annual medical bills. Mrs Flay is in a 12% tax bracket and her medical bills average $3,200 each year.

a. Should Mrs Flay choose the cash bonus or the nontaxable fringe benefit?

b. Does your answer change if Mrs. Flay is in the 24% tax bracket?