Reference no: EM132686869

Questions -

Q1. A taxpayer can invest $10,000 in a taxable 10-year bond that yields an annual pre- tax return of 6 percent or buy land (a capital asset) for $10,000 that is expected to increase at an annual pre-tax rate of 4 percent. The taxpayer expects to hold the bond and the land for 10 years and expects to pay capital gains taxes of 20 percent when the land is sold. The taxpayer's marginal tax rate on ordinary income is expected to be 25 percent throughout the 10-year period.

Q2. Greg Jones lives in Augusta, Georgia and has the opportunity to rent his condominium during the next Masters golf tournament. He has 2 offers- one to rent for 10 days at $500 per day and the other to rent for 16 days at $400 per day. Rental expenses will be negligible. What is your advice to Greg?