Mrs. Scott received a $12,000 cash payment. If her marginal tax rate is 40%, which of the following statements is true?
A. If the payment is taxable income, her after-tax cash flow is $4,800.
B. If the payment is not taxable income, her after-tax cash flow is $12,000.
C. If only $9,200 of the payment is taxable income, her after-tax cash flow is $9,200.
D. None of the above is true.
Answer: B
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