The Country of Robinya Has a Tax System Identical to That

question 51

Multiple Choice

The country of Robinya has a tax system identical to that of the United States.Suppose someone in Robinya bought a parcel of land for 10,000 deera (the local currency) in 1970 when the price index equaled 100.In 2010,the person sold the land for 100,000 deera,and the price index equaled 500.The tax rate on nominal capital gains was 20 percent.Compute the taxes the person paid on the nominal gain and the change in the real value of the land in terms of 2010 prices to find the after-tax real rate of capital gain.

• A)-20 percent
• B)20 percent
• C)42 percent
• D)64 percent

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Definitions:

Fee Simple Absolute

An ownership interest in which the holder has exclusive rights to ownership and possession of the land; the most comprehensive type of estate.

Conditional Estate

An ownership interest in which the holder has the same interest as that in a fee simple absolute except that this interest is subject to a condition.

Patent

Protection that grants the holder the exclusive right to produce, sell, and use the object of the patent for 20 years; can be obtained for a product, process, invention, machine, or a plant produced by asexual reproduction.

70 Years

A measure of time often associated with copyright duration, extending 70 years beyond the life of the creator.