14. The increase in the value of the stock (or of any asset) between when it is bought and when it is sold is called a _____________.

a. value gain

b. capital gain

c. volume gain

Booster class

Microeconomics

Skill

Understanding How Businesses Raise Financial Capital

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Raushan RajLv8

2 Nov 2020

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The country of Aquilonia has a tax system identical to that of Canada. Suppose an Aquilonian bought a parcel of land for $10,000 in 1960 when the price index equalled 100. In 2019, the person sold the land for $100,000, and the price index equalled 500. If the person must pay 20 percent of any capital gain in taxes, what is the after-tax real capital gain (in 2019 dollars) on the land?

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The country of Aquilonia has a tax system identical to that of Canada. Suppose someone in Aquilonia bought a parcel of land for $10000 in 1960 when the price index equalled 100. In 2002, the person sold the land for $100000, and the price index equalled 500. If the person must pay 20 percent of any capital gain in taxes, which of the following is the after-tax real capital gain(in 2002 dollars) on the land?

a. $72000

b. $62000

c. $32000

d. $6400

Can someone show step by step how to solve this question?

When someone owns an asset (such as a share of stock) that rises invalue, he has an "accrued" capital gain. If he sells the asset, he"realizes" the gains that have previously accrued. Under the U.S.income tax, realized capital gains are taxed, but accrued gains arenot.

a. Explain how individuals' behavior is affected by thisrule.

b. Some economists believe that cuts in capital gains tax rates,especially temporary ones, can raise tax revenue. How might this beso?

c. Do you think it is a good rule to tax realized but not accruedcapital gains? Why or why not?