02 Jan The notion of basis

Week 3 discussion

Dq1

Basis: What Is It and Why Do We Care?

The notion of basis is crucially important in determining the tax consequences that result from virtually any property-based transactions, whether it is the sale of $100 of stock, or a $10,000,000,000 merger of two multinational corporations. It’s important, then, to answer one key question: What exactly is basis? How is it used in calculating the gain or loss that results from the sale of capital property? What is the rationale or justification for considering basis in calculating the amount of gain or loss?

Dq2

You Decide: Tax Capital Gains

The question of whether capital gains should be subject to the federal income tax has long been a subject of debate. Today, however, the issue has become less abstract and theoretical, because many congresspeople (and pundits and commentators, etc.) are openly advocating substantial reductions in or outright abolition of all such taxes. Scour the Internet for commentary on this issue, and consider the arguments in light of what you know about capital gains taxes. Is the capital gains tax a good tax? Why or why not? In making your decision (and explaining your answer), make sure that you consider some of the fundamental requirements of a good tax that we explored in Week 1, such as fairness, efficacy in raising funds, and relative ease of administration. Include links to and summaries of the articles that you’ve reviewed and found particularly influential so that we can all comment on this issue!