The Yellow Equipment Company, an accrual basis C corporation, is a manufacturer’s representative and works on a commission basis (15% of sales that…

The Yellow Equipment Company, an accrual basis C corporation, is a manufacturer’s representative and works on a commission basis (15% of sales that it places) and does not carry inventory. In November 2010, Yellow made a sale and collected a commission for $15,000. In June of 2011, the customer had not received the equipment from the manufacturer and canceled the order. As a result, Yellow was required to refund the $15,000 commission to the manufacturer. Yellow’s taxable income in 2010 was $70,000, and in 2011 Yellow’s taxable income was $20,000 after deducting the refund. The applicable tax rate schedule is 15% on the first $50,000 of income and 25% on income in excess of $50,000. What is the effect of the refund on Yellow’s 2011 tax liability?