Steve purchases some land for $30,000 . He maintains it, but makes no improvements to it. One year later he sells it for $32,000 . Stephanie puts $30,000 in a savings account that pays 6% interest. Steve has to pay the 50% capital gains tax, Stephanie is in the 35% tax bracket. The inflation rate was 2%. Who had the higher before-tax real gain and who had the higher after-tax real gain?
a. Steve had both the higher before-tax real gain and the higher after-tax real gain.
b. Steve had the higher before-tax real gain but Stephanie had the higher after-tax real gain.
c. Stephanie had the higher before-tax real gain but Steve had the higher after-tax real gain.
d. Stephanie had both the higher before-tax real gain and the higher after-tax real gain.
b
You might also like to view...
In many corporations, there is "separation of ownership from control." What does this mean?
A) The board of directors controls corporate operations, although the managers of the corporation own the corporation. B) Top corporate managers only make decisions that have been approved unanimously by shareholders. C) The shareholders control the corporation, although the board of directors owns the corporation. D) The managers of the corporation run the corporation, although the shareholders own the corporation.
For a worker, the opportunity cost of an hour of leisure
a. rises by $8 when his wage rises by $8 per hour. b. falls by $8 when his wage rises by $8 per hour. c. is the same for a celebrity talk-show host as it is for a teacher. d. is determined by factors that are unrelated to his hourly wage.