Disclaimer: I do not know that I have the exact, bottom line question correct. I also searched for this on the Café, but could not find it- though it may already be buried here somewhere.

Here is the problem:
Two men are talking about buying and selling a horse. One man says that he bought a horse for $50. He then turned around and sold it $60. Later, he bought the horse back for $70. He is considering selling the horse for $80, but wants to know if he will make money, and if so how much.

This is the problem the best that I can remember it. I have arrived at two answers that are different, yet I believe both are reasonably arguable in different cases. I am looking for a hardline answer though. I have heard a few. A couple I can dispute. What is your answer?

Thanks in advance.

Depends on what a horse is really worth to you.

Everytime you see the word "horse" substitute "$1000" Clearly you would be foolish to sell the $1000 for $80.

Now try it again, only this time for the word horse substitute the word "penny." You would now make a different decision.


Jack Shalom

I'm not certain that question is phrased right. I recognize the dilemma (from a Martin Gardner book I think) but can't see it in that phrasing. As I see it, regardless of what has happened before, if you buy something for 70 and sell it for 80 you have gained 10. What is the other reasoning and will the IRS accept that resoning?

/Tomas

It seems fairly simple as phrased. Assume the first guy starts out with $60 in his pocket. He spends $50 on the horse and has $10 left. He sells the horse for $60 and now has $70 in his pocket. He spends the $70 buying the horse back and has nothing left. Then he sells the horse for $80. He started with $60 and now has $80- a $20 profit.