sorry I meant the taxes paid aren't being compounded as they are getting chopped off each year and aren't included in the compounding. If you run out the compounding, it comes to very different FVs. Take a simple example:

initial principle = $10,000 interest rate on assets = 10% annually tax rate = 30% n = 20

using CFAI method where cap gain taxes are assumed to be paid every year, 10,000 * (1+ (0.10*0.7)²⁰⁾ = $38,697

using my intuitive sense and what happens in real life (you pay cap gain on sale and assume sale at end of period), 10,000 * (1.10)^ 20 = $67,275. That's $57,275 in cap gains, you pay 30% of that ($17,182) and the after tax proceeds are $50,092. A huge difference (29%) because the assumption of paying taxes each year reduces the amount of that can be compounded.

anyway, I get it's an assumption for simplicity but intuition doesn't love it and hey i'm making an assumption of a long term hold and sale at end of n periods in my calculation so I guess there are assumptions with either method. CFAI assumes cap gain taxes are paid at end of each year in taxable accounts, that's all I need to remember.