Virginia is a cash-basis, calendar-year taxpayer. Her salary is $20,000, and she is single. She plans to purchase a residence in 2014. She anticipates her property taxes and interest will total $7,200. Each year, Virginia contributes approximately $1,000 to charity. Her other itemized deductions total approximately $800. For purposes of this problem, assume that 2014 tax rates, exemptions, and standard deductions are the same as for 2013.
a. What will her gross tax be in 2013 and 2014 if she contributes $1,000 to charity in each year?
b. What will her gross tax be in 2013 and 2014 if she contributes $2,000 to charity in 2013 but makes no contribution in 2014?
c. What will her gross tax be in 2013 and 2014 if she makes no contribution in 2013 but contributes $2,000 in 2014?
d. Alternative c results in a lower tax than either a or b. Why?