Final answer:
The decline in book value of stock does not directly affect tax liability for Carol and Dave unless the stock is sold, since taxation occurs on realized gains and losses.
Step-by-step explanation:
The question pertains to the treatment of the decline in the book value of stock for taxation purposes, and whether there's a difference in this treatment between two individuals, Carol and Dave. Under tax law, a decrease in book value does not directly affect tax liability unless the stock is sold. This is because taxation occurs on realized gains and losses, not on unrealized ones. Capital losses can be used to offset capital gains and to reduce taxable income up to a certain limit. The tax treatment for Carol and Dave would be the same unless there are specific tax provisions or individual circumstances that apply differently to each, such as varying tax rates due to different income levels or different levels of capital gains and losses.