Refer to the facts in the preceding problem. At the beginning of the year, Mr. L could have invested his $50,000 in Business Z with an 8 percent annual return. However, this return would have been ordinary income rather than capital gain.
a. Considering the fact that Mr. L could have invested in Business Z, how much implicit tax did he pay with respect to Investment X described in the preceding problem?
b. Did Mr. L make the correct decision by putting his $50,000 into Investment X in-stead of Business Z?