If you purchased shares of common stock in 1990 for $1,000 and sold them for $2,000 in 2001 you would be liable for taxes on
A)$2,000.
B)$1,000 less the rate of inflation.
C)$1,000.
D)$2,000 less the rate of inflation.

Question

Quizplus · Accepted Answer

You would only be liable for taxes on the capital gain, which in this case is $1,000 ($2,000 - $1,000). The rate of inflation does not affect the calculation of capital gains for tax purposes.

If You Purchased Shares of Common Stock in 1990 for $1,000