VALUE OF LAND AN UNTAXED VALUE 39 
you would purchase the lot for $6,000, because interest 
upon that sum would amount to the stipulated $300 a 
year. But if, on the contrary, the lot hears a mortgage 
of $2,000, upon which the annual interest charge is $100, 
then the lot will cost you $4,000. 
(a) The mortgage interest charge of $100 reduces 
the selling price of the land by the amount of the mort 
gage, $2,000, and you will buy the land, not at $6,000, 
but at $4,000, the value of the equity remaining after 
mortgage interest has been paid. 
(b) By purchasing title you will assume the mort 
gage and will pay the mortgage interest, |ioo, but 
that $100 will not come out of your $200. the net 
income from your investment of $4,000; it will come 
out of the gross income, the ground rent, $300. It is 
a part of, and not an addition to, the ground rent. 
You will pay the interest, but you will not bear it, 
because you will have bought yourself clear of the 
burden. 
(c) The lot will thus cost you annually for use, 
interest on your purchase price ($4,000 at 5 per cent) 
I200, plus mortgage interest ($2,000 at 5 per cent) 
1100, equal in all to $300, all that the land is worth 
for use, use being the only relation of land to man with 
Which economics has reasonable concern. 
Proposition 3. — But, besides being subject to a 
mortgage of $2,000, assume further that this lot of land 
P subject also to an old tax* of $100, which charge the 
purchaser must also assume. You will then purchase 
the land not at $4,000, but at $2,000. 
(a) As already seen, the mortgage interest charge of 
* By the term “old tax” is intended the tax in force at time of last purchase; 
“new tax” one imposed since last change of ownership.