The longer an investor waits to take capital gains,the lower is the present value of the tax liability.

Question

Quizplus · Accepted Answer

This statement is true because the present value of a tax liability is calculated by discounting future cash flows at a certain rate. The longer an investor waits to take capital gains, the lower the discount rate will be, resulting in a lower present value of the tax liability. Additionally, waiting to take capital gains allows the investment to grow tax-deferred, which can also reduce the tax liability.

The Longer an Investor Waits to Take Capital Gains,the Lower