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Through November, Cameron has received gross income of $120,000. For December, Cameron is considering whether to...

Through November, Cameron has received gross income of $120,000. For December, Cameron is considering whether to accept one more work engagements for the year. Engagement 1 will generate $7,000 of revenue at a cost to Cameron of $3,000, which is deductible for AGI. In contrast, engagement 2 will generate $5,000 of qualified business income (QBI) which is eligible for the 20% QBI deduction. Cameron files as a single taxpayer.


a) Calculate Cameron’s taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has no itemized deductions.

(b) Which engagement maximizes Cameron’s after-tax cash flow? Explain.

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