Eight years ago you purchased an asset for $100,000 that has yielded a nominal capital gain of $30,000. If you sold the asset today, your inflation-adjusted capital gains would be zero due to inflation over the last eight years. The capital gains tax is 28 percent. If you sold the asset today your tax liability would be

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The nominal capital gain is $30,000, but with inflation taken into account, the real capital gain is zero. Therefore, there is no taxable gain and the tax liability would be zero. The taxable gain is calculated as the nominal gain minus the inflation adjustment, which in this case is $30,000 - $30,000 = $0. However, since the capital gains tax rate is 28 percent, the tax liability is 28 percent of zero, which is also zero. Therefore, the correct choice is C, which represents the tax liability of 28% of the nominal capital gain of $30,000, or $8,400.

Eight Years Ago You Purchased an Asset for $100,000 That