Kaitlyn purchased one share of Northwest Energy stock for $200;one year later she sold that share for $400.The inflation rate over the year was 50 percent.The tax rate on nominal capital gains is 50 percent.What was the tax on Kaitlyn's capital gain?
A)$50
B)$75
C)$100
D)$200

Question

Quizplus · Accepted Answer

To calculate Kaitlyn's capital gain, we need to adjust the original purchase price for inflation. 
The new cost basis = original cost basis x (1 + inflation rate) 
New cost basis = $200 x (1 + 0.50) 
New cost basis = $300

Kaitlyn's capital gain is $400 - $300 = $100.

The tax on the capital gain is 50% of $100, which is $50.

Therefore, the answer is C.

Kaitlyn Purchased One Share of Northwest Energy Stock for $200;one