What should you do if you own a piece of land that you bought 5 years ago for $100,000.

You can sell the land today for $180,000 and the tax rate is 40%.

You believe the land will be worth $300,000 in five years because you expect a new shopping center to be built next to your land, so You can wait and sell the land at that time (in 5 years).

Or, you can apply for a permit to transform today your land to a parking lot. The cost of the project will be $10,000 today, which will count as a deduction for taxes, and you expect the parking lot will generate yearly pre-tax profits for five years of $60,000 per year beginning in one year (first profit 12 months from now). However, a condition of the permit will be that after 5 years you will spend $20,000, that also will count as a tax deduction, to convert the parking lot to a playground and that you will donate the land to the municipality. Your tax advisor tells you that you will be allowed a $150,000 tax deduction for the donated land. Your after-tax discount rate is 10%.