Suppose that the government introduces a 50% tax on returns to investment and allows a deduction against taxable income for any losses (assume that the tax rate on taxable income is also 50%).Which statement is TRUE?

Question

Quizplus · Accepted Answer

Under this tax policy, if an investment loses money, the investor can deduct the loss against taxable income, effectively sharing the loss with the government at the tax rate of 50%. This means the investor bears only half the loss.

Suppose That the Government Introduces a 50% Tax on Returns