When someone owns an asset (such as a share of stock) that rises in value, he has an
Chapter 12, Problem Problems and Applications 12.6(choose chapter or problem)
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 asset, he realizesthe gains that have previously accrued. Underthe U.S. income tax, realized capital gains aretaxed, but accrued gains are not.a. Explain how individuals behavior is affectedby this rule.b. Some economists believe that cuts in capitalgains 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 realizedbut not accrued capital gains? Why or whynot?
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