.Serena purchased 10 shares of GLC, Inc.stock for $200 per share; one year later she sold the 10 shares for $220 a share. Over the year, the price level increased from 135.0 to 143.1. The tax rate on capital gains is 50 percent. If the capital gains tax is on nominal gains,
Hello Michelle, if the question calls for the calculation of the capital gains tax on nominal terms, then I believe the tax would be simply calculated as 50% of the gain, which would be $100. However, if the rate is on real terms rather than nominal, then we would need to use the price level change information because the purchasing power of the currency has changed due to inflation. Once this is done to adjust for inflation, the same $200 a year ago would be worth $212 today. Conversely, the same $220 today would only be worth $207.55 a year ago. However, I do not believe capital gains tax is calculated on real terms as this would add complexity to the gains tax calculation.