Taxation of asset returns rb is the before-tax rate-of-return of a taxable asset is the rate-of-return of a tax exempt asset t is the tax rate The no-arbitrage rule is: (1-tr=r L.e. after-tax rates-of-return are equalTaxation of Asset Returns rb is the before-tax rate-of-return of a taxable asset. re is the rate-of-return of a tax exempt asset. t is the tax rate. The no-arbitrage rule is: (1 - t)rb = re I.e. after-tax rates-of-return are equal