An important piece of criteria for investors to consider when deciding between real estate investment opportunities and investing in stocks or bonds is the effect of income taxes on their return. For most investors, the effective tax rate on commercial real estate is:
A) greater than the effective tax rate on a stock or bond investment
B) equal to the effective tax rate on a stock or bond investment
C) less than the effective tax rate on a stock or bond investment
D) cannot be compared across asset classes.

Question

Quizplus · Accepted Answer

The effective tax rate on commercial real estate is generally lower than on stocks or bonds due to the availability of tax deductions such as depreciation, property taxes, and mortgage interest. This can lead to higher after-tax returns for real estate investors compared to stock or bond investors.

An Important Piece of Criteria for Investors to Consider When