Suppose the taxpayer can time when he is to receive $100,000 of income that is fully taxable. Current interest rates are 10% on fully taxable securities, and the taxpayer faces a current tax rate of 32%. The taxpayer expects tax rates to increase to 35% in year 2. If the taxpayer delays receipt, the amount will grow to $110,000 at the end of year 2. The taxpayer must decide whether to receive the money today at the end of year 1 or at the end of year 2.

a. When should he elect to receive the income?

b. Is there an interest rate at which the taxpayer is indifferent between the two options?