Suppose Jack Owns a Warehouse in a Rapidly Expanding Part

question 3

Essay

Suppose Jack owns a warehouse in a rapidly expanding part of a town.Because of the location of the warehouse,it has increased in value from $300,000 (the price Jack paid)to $400,000 (the price Jack would get if he were to sell it).The doctor has recently told Jack that he has one year to live-and the doctor is always right about such things.The capital gains tax rate is 25%.Jack's wealth will be distributed among his children when he dies.The warehouse is not being used.Jack must decide whether to sell the warehouse now and pass the cash on to his children.Assume that there is no estate tax but that the capital gains tax code is the same as that in place in the United States.
(a)What is the socially efficient thing for Jack to do? Explain your answer.Be sure to describe the tax implications of your answer as well.
(b)What would you advise Jack to do? Explain your answer.Be sure to describe the tax implications of your answer as well.

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