The gross after-tax rate of return from an investment is the gross after-tax return divided by the net cost of the investment. Explain how the US federal tax system makes the gross after- tax rate of return for some types of investments higher than if the investment was entirely exempt from taxation (so that it received no favored treatment and no tax on any of its returns).

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The US federal tax system offers different treatments for different types of investments which can make the gross aftertax rate of return for some inv... View the full answer