The Country of Veridian Has a Tax System Identical to That

question 188

Multiple Choice

The country of Veridian has a tax system identical to that of the United States.Suppose someone in Veridian bought a parcel of land for 10,000 deera (the local currency) in 1964 when the price index equaled 100.In 2005,the person sold the land for 100,000 deera,and the price index equaled 500.The tax rate on nominal capital gains was 20%.Compute the taxes the person paid on the nominal gain and the change in the real value of the land in terms of 2005 prices to find the after-tax real capital gain.

• A)$72,000
• B)$62,000
• C)$32,000
• D)$6,400

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Definitions:

Retained Earnings

Profits that a company retains for reinvestment in its operations, rather than distributing to shareholders as dividends.

Reporting Period

A specified duration of time for which an organization prepares its financial statements and reports to present its financial performance and position.

Tax Adjustments

Modifications made to financial statements to account for differences between accounting practices and tax regulations.

Bonus Shares

Shares issued to current shareholders at no cost, based on the number of shares that a shareholder owns.