Embarrassed I don't know how to solve this

David7

New member
Joined
May 9, 2017
Messages
1
My question relates to a simple situation:

My relative owns a property she is looking at selling.
Problem for her is that if she sells she will have to pay approx. 40% tax on the money she receives from the sale.
She asked me for advice. She wanted to know how much the property would have to increase in value over a period of 5 years before the net amount of money she would receive (after paying the 40% tax) would be the same amount of money as she would receive if she sold now, but did not have to pay any tax at all, i.e. $100,000.
I had a basic idea of how to work this out, but do not know how to do it properly :(
Can someone please show me step by step how you would go about working this out using algebra.
Interested to know both the overall percentage gain required to arrive at the net figure and the percentage per annum over the time period if one takes into account the compounding effect.
In summary:
The property is worth $100,000.
The tax rate is 40% on the sale monies arising.
The time period she asked about was 5 years.
There needs to be a sum of $100,000 clear of the 40% tax left available for my relative after the assumed sale in 5 years time.
Thanks.
 

Subhotosh Khan

Super Moderator
Staff member
Joined
Jun 18, 2007
Messages
19,081
My question relates to a simple situation:

My relative owns a property she is looking at selling.
Problem for her is that if she sells she will have to pay approx. 40% tax on the money she receives from the sale.
She asked me for advice. She wanted to know how much the property would have to increase in value over a period of 5 years before the net amount of money she would receive (after paying the 40% tax) would be the same amount of money as she would receive if she sold now, but did not have to pay any tax at all, i.e. $100,000.
I had a basic idea of how to work this out, but do not know how to do it properly :(
Can someone please show me step by step how you would go about working this out using algebra.
Interested to know both the overall percentage gain required to arrive at the net figure and the percentage per annum over the time period if one takes into account the compounding effect.
In summary:
The property is worth $100,000.
The tax rate is 40% on the sale monies arising.
The time period she asked about was 5 years.
There needs to be a sum of $100,000 clear of the 40% tax left available for my relative after the assumed sale in 5 years time.
Thanks.
If the selling price is 'S'

100000 = S - 0.4*S

S = ...?
 
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