Final answer:
Tax laws in the United States encourage taxpayers to keep assets that have appreciated to defer capital gains taxes and sell assets that have declined in value to realize capital losses. This involves strategies such as tax loss harvesting to manage taxes effectively. The best choice that fits the tax strategy motivated by current tax laws would be (c) keep; sell.
Step-by-step explanation:
The question you've asked is regarding how tax laws influence the behavior of taxpayers in regard to their assets. Specifically, the question is whether tax laws encourage taxpayers to sell assets that have appreciated in value and keep assets that have declined in value, or some other combination of actions.
In the United States, and many other economies, capital gains taxes apply to the profit realized on the sale of a non-inventory asset that has grown in value. Typically, the rate at which capital gains are taxed is lower than regular income tax rates. This incentivizes investors to hold onto assets that have appreciated in order to defer the capital gains tax. On the other hand, selling assets that have declined in value allows taxpayers to realize capital losses, which can offset other capital gains and reduce the overall tax burden. Furthermore, the tax loss harvesting strategy is an example of how taxpayers might sell assets that have declined to realize a loss for tax purposes, even if they still believe in the asset's long-term potential. This strategy can be effective in managing taxes and improving after-tax returns.