Question

When someone owns an asset (such as a share of stock) that rises in value, he has an “accrued” capital gain. If he sells the asset, he “realizes” the gains that have previously accrued. Under the U.S. income tax, realized capital gains are taxed, but accrued gains are not.

The higher the tax on capital gains, the ---------------------------- likely the investor would sell the investment.

Cuts in capital gains tax rates can raise tax revenue if the lower tax rate --------------------------------- the volume of trade transactions by a large enough margin.

Answer 1

Higher the tax on capital gains, the less likely the investor would sell the investment.

He would prefer to accrue the value of investment more till the lowering of tax rates.

if the lower tax rate increases the volume of trade transactions by a large enough margin.

lower tax rate increases the volume of trade transactions then there will be high tax revenue collection.