QUESTION 2 HAS THREE PARTS (A, B, C) FOR A TOTAL OF 25 MARKS Chike Bulhari is an investor in the country of Wakanda, where interest and dividends (investment income) are taxed annually and capital gains are taxed only when realized. Both investment income and realized capital gains are taxed at a flat rate of 20%. The currency of Wakanda is the WAK. Bulhari has an investment account holding only non-dividend-paying equities. The account has a current market value of WAK 100,000, an expected return of 8%, and a cost basis of WAK 100,000. Bulhari plans to liquidate the account in 10 years and does not plan to make any contributions or withdrawals in the interim. A. Calculate the after-tax future value, accrual equivalent after-tax return, and the accrual equivalent tax rate of the investment account. [10 MARKS] Bulhari has another taxable equity investment account with two stocks X and Y. In the current year (Year 1), Bulhari sells stock X and realizes a capital gain of WAK 50,000. Stock Y has an unrealized loss of WAK 45,000 and a cost basis of WAK 220,000. Bulhari asks his PWA to implement a tax loss harvesting strategy. His PWA comes up with two plans: Plan A: Sell Stock Yin Year 1 to realize the loss and replace it with Stock Z, which the advisor believes will have the same expected return as Stock Y. In Year 2, sell Stock Z at an expected market value of WAK 250,000. Plan B: Hold Stock Y until Year 2 and then sell it at the expected market value of WAK 250,000. B. Calculate the tax liability of Year 1 and Year 2 for each plan. [10 MARKS] C. Explain which plan is better for achieving tax loss harvesting. [5 MARKS]