Norbert purchased 10 shares of Gentech stock for $200 a 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 is 0.5 * $200 = $100.

Norbert Purchased 10 Shares of Gentech Stock for $200 a Share