Sal, a calendar year taxpayer, uses the cash-basis method of accounting for his sole proprietorship. In late December he performed $40,000 of consulting services for a client. Sal typically requires his clients to pay his bills immediately upon receipt. Assume that Sal's marginal tax rate is 30% this year and 35% next year and that he can earn an after-tax rate of return of 12% on his investments. Should Sal send his client the bill in December or January?

Certain types of income are taxed at a lower rate than ordinary income. T or F

Jane and Ed Rochester are married with a two-year-old child who lives with them and whom they support financially. In 2013, Ed and Jane realized the following items of income and expense: