Just suck it up and learn the more complicated formulas? some of that stuff with 3 returns sources with 3 tax rates over 15 years or whatever is just crazyshit
Straight out the book: $250,000 investment expected return 7.5% 10% capital gains tax 50% of all capital gains are recognised each year How much will the investment be worth in 15 years?
Tecg = Tcg * (1-Pcg)/(1-Pcg*Tcg) = .1 * .5 / (1-.05) = .05/.95 = 0.0526 250*(1+.075)^15*(1-Tecg) = 250*(1.075)^15*(1-0.0526) = 700.787 ans 700787?
Blended tax Rart = 0.075 * (1 - 0.5*.1) = 0.07125 from Rart = return * (1 - tcPc) Now, effective gains tax = tcapgain * (1 - Pcg) / (1 - Pcapgain*tcapgain) = 0.1 * (1 - 0.5) / (1 - 0.5*.1) = 0.05263 Now, FVIFall tax = ((1 + Rart)^n)*(1-effective gains tax) + teffective gains tax - (1-b)*tcapgain) Assume basis is = 250k so the last term is removed as b = 250/250 = 1 multiply FVIFalltax*250k = 250 * (((1 + 0.07125)^15))*(1-0.05263) + 0.05263) = 678,158
Answer options: A. $640,747 B. $665,747 C. $678,158
Need to calculate an effective capital gains tax to take into account the residual deferred taxes
C it is you are the man thealiman
I reckon this is some of the most obtuse content in the curriculum
still have a lot to learn 
I can nver remember these long formulas. CPK what is the trick here mate? S
no tricks, you need to know the formulas. TheAliMan aced this one.
Some intuition about this formula: Tecg = Tcg * (1-Pcg)/(1-Pcg*Tcg) The term 1/(1-Pcg*Tcg) accounts for the taxes that are paid annually - in our case the term is 1/(1-.5*.1) = 1/.95. Basically, every year, 5% of the return is tax, so if you want to find your return before taxes from the return after taxes, you divide by .95. Then, if you want to find the part of the return before tax that hasn’t been taxed yet, you multiply by Pcg, or .5 in our case. The Tecg is the tax rate that you apply to the return after the annually paid taxes have been paid. Hard to put in words, but perhaps this helps somebody anyway.