1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
pentagon [3]
3 years ago
14

When someone owns an asset (such as a share of stock) that rises in value, he has an "accrued" capital gain. If he sells the ass

et, he "realizes" the gains that have previously accrued. Under the U.S. income tax, realized capital gains are taxed, but accrued gains are not.
a. Explain how individuals' behavior is affected by this rule.
b. Some economists believe that cuts in capital gains tax rates, especially temporary ones, can raise tax revenue. How might this be so?
c. Do you think it is a good rule to tax realized but not accrued capital gains? Why or why not?
Business
1 answer:
puteri [66]3 years ago
6 0

Answer:

Please check the answer below

Explanation:

a. One issue is the "locking-in" of assets. If I hold shares of Corporation X, then I can delay paying taxes as long as I don't sell. Effectively, I get to keep all of the interest/dividend payments on my tax liability. However, if I discover that X is really a poor investment and Corporation Y is better, then selling X and buying Y means that I have to pay taxes. This might discourage me from making a switch to a more profitable/efficient investment decision. This is the "locking-in" effect.

b. A short-run cut might cause many people to sell stocks that they had felt "locked-in" with. The penalty for switching is smaller, so more people will do it -- resulting in a great deal of cap gains tax revenue collected.

c. Taxing realized gains, even when the stock is not sold, rather than just accrued gains would eliminate this locking-in effect. Investors would not be penalized for switching to a better investment, and long-term capital gains revenue (as well as efficiency) would rise.

You might be interested in
Windathon, Inc. expects sales volume totaling $500,000 for June. Data for the month follows:
ivann1987 [24]

Answer:

Here the variable cost can be computed using the following formula:

Variable cost = (Sales commissions  + Shipping expense + Miscellaneous selling expenses) ×Sales

Variable cost = (4% + 1% + 3/4%) x $500,000 = $28,750

Fixed cost = Sales manager's salary + Advertising expense + Miscellaneous selling expenses

= $30,000 + $25,000 + $2,100

= $57,100

<em>Total selling expense budget = Variable cost + Fixed cost</em>

<em>= $28,750 + $57,100 </em>

<em>= $85,850</em>

8 0
3 years ago
NewKirk Inc.., is an unlevered firm with expected annual earnings before taxes of $21 million in perpetuity. The current require
IrinaVladis [17]

Answer:

$11,895,000

Explanation:

Expected annual earnings before tax = $21,000,000

Debt issue = $30,000,000

Interest rate = 9%

Annual Interest expenses = $30,000,000 × 9%

= $2,700,000

EBT = EBIT - Interest expenses

= $21,000,000 - $2,700,000

= $18,300,000

Net income = $18,300,000 × (1 - 35%)

= $11,895,000

Cash flows available to equity holders after recapitalization will be $11,895,000.

8 0
3 years ago
Peters Manufacturing Company has the following data at June 30, 2019:
nignag [31]

Answer:

Gross Profit                      $ 74,000

<u>Cost of Goods sold                                   $ 506,000</u>

Explanation:

Peters Manufacturing Company

Income Statement

June 30, 2019

<u>Sales                                                 $580,000</u>

Total manufacturing costs 430,000

Add Work in process inventory, June 1 18,100

Cost of Goods Available for Manufacturing  548,100

Less Work in process inventory, June 30 30,400

Cost Of Goods Manufactured  517,700

Add Finished goods inventory, June 1 43,500

Cost Of Goods Available for Sale  561,200

Less Finished goods inventory, June 30 55,200

<u>Cost of Goods sold                                   $ 506,000</u>

Gross Profit                      $ 74,000

5 0
3 years ago
The ability to perform more than one complex encoding tasks simultaneously demonstrates the importance of
lys-0071 [83]
The ability to perform more than one complex encoding tasks simultaneously demonstrates the importance of automatic processing. Automatic processing does not require attention to be paid and deliberately to be put in effort. Something that is done <span>without giving it any thought is automatic processing. </span>
7 0
3 years ago
Read 2 more answers
SparklingLeaves is one of the major suppliers of automobile tools to StanMotors, a leading automobile company. Many of the tools
algol [13]

Answer:

D) credible commitment

Explanation:

This is basically an exclusive supplier agreement since Sparkling Leaves and Stan Motors signed a contract that lasts 15 year, and it states that Sparkling Leaves will provide automobile tools only to Stan Motors and Stan Motors will only purchase the tools they need from Sparkling Leaves.  

Such a contract needs a serious and credible commitment between both parties, since it lasts several years and it binds both companies to work together exclusively for that period.

5 0
3 years ago
Other questions:
  • Tony charges $5 to park a car in his parking lot. He pays $40 per day to rent the lot. If 50 cars park in his lot during the day
    6·1 answer
  • You have just received your paycheck from Chick-Fil-A. You go to the bank to deposit your check in the amount of $120.00 to your
    5·1 answer
  • Which sociological perspective would view sports as a form of big business in which profits are more important than the health a
    10·1 answer
  • Don’s Fashions is noticing a downward trend in sales. The company has been reaching out using social media to connect with custo
    12·1 answer
  • Which of the following statements about goods is FALSE? Question 1 options:
    7·1 answer
  • Jacqui decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own bus
    13·1 answer
  • Mr. Dennison knows each and every child who comes in to his Kumon reading center, and he prides himself on knowing how he can pe
    9·1 answer
  • Harris Company had checks outstanding totaling $15,400 on its May bank reconciliation. In June, Harris Company issued checks tot
    13·1 answer
  • What are the four phases of the business cycle? How long do business cycles last? Why does the business cycle affect output and
    11·1 answer
  • What is a tariff?
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!