Norbert purchased 10 shares of Gentech stock for $200 per share in year 1 and sold all the shares in year 2 for $220 a share.Between year 1 and year 2,the price index increased by 5 percent.The tax on capital gains is 50 percent.If the capital gains tax is on nominal gains,how much tax does Norbert pay on his gain?

Question

Quizplus · Accepted Answer

Norbert's nominal gain is ($220 - $200) * 10 = $200. The tax on nominal gains is 50%, so the tax paid is 50% of $200, which is $100.

Norbert Purchased 10 Shares of Gentech Stock for $200 Per