Assume that a taxpayer can choose when he is to received $10,000 of fully taxable income. If the taxpayer received the income at the end of Year 1, he will received exactly $10,000. If he delays receipt of the income until the end of Year 2, the amount will grow to $11.000. if the taxpayer takes the money at the end of Year 1, he can invest the proceeds and earn a pre-tax return 10 percent over the next year.

If the taxpayer faces a marginal tax rate of 31 percent in both Year 1 and Year 2, when should he elect to receive the income?

At what pre-tax rate of return, will the taxpayer be indifferent to taking the money in Year 1 and Year 2?

If the taxpayer's marginal tax rate increase to 35 percent in Year 2 when should he elect to received the income?

what would the tax rate need to be in Year 2 make the tax paper indifferent ?