How much must the land increase

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Problem - Harper is considering three alternative investments of $10,000. Assume that the taxpayer is in the 24% 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:

A taxable corporate bond yielding 5.333% before tax and the interest can be reinvested at 5.333% before tax.

A Series EE bond that will have a maturity value of $12,200 (a 4% before-tax rate of return).

Land that will increase in value.

The gain on the land is 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?

Reference no: EM132665863

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