Question
The problem from my textbook is: Harper is considering three alternative investments of $10,000. Assume that the taxpayer is in the 28% marginal tax bracket
The problem from my textbook is: Harper is considering three alternative investments of $10,000. Assume that the taxpayer is in the 28% marginal tax bracket for ordinary income and 15% for qualifying capital gains in all tax years. The selected investment will be liquidated at the end of five years. The alternatives are: 1) a taxable corporate bond yielding 5% before tax and the interest can be reinstated at 5% before tax. 2) a series EE bond that will have a maturity value of $12,200 (a 4% before-tax rate of return). 3) Land that will increase in value. The gain on the land will be classified and taxed as a long term capital gain. The income from the bonds is taxed as ordinary income. How much must the land increase in value to yield a greater after tax return than either of the bonds?
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