191k views
0 votes
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?

User Bharadwaj
by
8.2k points

1 Answer

1 vote

Answer:1. The higher before tax real gain is for Steve for $2000 i.e (32,000- 30,000) while Stephanie makes $1800(6% of $30,000)

2. The higher after tax real gain is for Stephanie losing 35% of her income

which reduce her income to $1170 while Steve loss 50% of his income which reduce to $1000.

Step-by-step explanation

The inflation rate is not considered in the calculation because it's constant for both parties.

User Sankalp Singha
by
8.8k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.