Suppose the annual inflation rate is 10%,and an asset bought at the beginning of the year for $100,000 is sold for $115,000.If the capital-gains tax rate is 30%,what is the (approximate)effective tax rate on the sale of this asset?
A)10%
B)20%
C)25%
D)30%
E) 4%

Question

Quizplus · Accepted Answer

The effective tax rate is the amount of tax paid divided by the amount of gain. In this case, the gain is $15,000 and the tax paid is $4,500 (30% of $15,000). Therefore, the effective tax rate is $4,500/$15,000 = 30%.

Suppose the Annual Inflation Rate Is 10%,and an Asset Bought