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17 September, 07:06

Kaitlyn purchased one share of Northwest Energy stock for $200; one year later she sold that share for $400. The inflation rate over the year was 50 percent. The tax rate on nominal capital gains is 50 percent. What was the tax on Kaitlyn's capital gain?

a) $50

b) $75

c) $100

d) $200

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Answers (1)
  1. 17 September, 07:16
    0
    The tax on Kaitlyn's capital gain was $100

    Explanation:

    In order to calculate the tax on Kaitlyn's capital gain we would have to calculate first the Nominal capital gain as follows:

    nominal capital gain=$400 - $200

    nominal capital gain = $200

    Therefore, tax on Kaitlyn's capital gain = tax percentage*nominal capital gain

    =50%*$200

    =$100

    The tax on Kaitlyn's capital gain was $100
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