Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $20,000 of legal services for a client. Manny typically requires his clients to pay their bills immediately upon receipt. Assume Mannys marginal tax rate is 37 percent this year and next year, and that he can earn an after-tax rate of return of 12 percent on his investments.

a. What is the after-tax income if Manny sends his client the bill in December?

b. What is the after-tax income if Manny sends his client the bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.

c. Based on requirements a and b, should Manny send his client the bill in December or January?