Question

You paid $100,000 for an asset 10 years ago. During those ten years, there has been a 50% inflation. You now sell the asset for $150,000. If your capital gains tax is 15%, what is your real gain or loss on this investment after taxes?

		$42,500.
		$50,000.
		-$7,500.
		Zero.

Answer 1

Answer : The answer is option A : $42,500.

Capital gain = Current sale price - Previous paid amount = 150,000 - 100,000 = $50,000.

Capital gain tax = 15% = 0.15

Paid tax amount on capital gain = Capital gain * Capital gain tax = 50,000 * 0.15 = $7,500.

Real gain on investment after tax payment = Capital gain - Paid tax amount on capital gain = 50,000 - 7,500 = $42,500.

Therefore, here my real gain from investment after tax payment is $42,500.

For this reason except option A other options are not correct. Therefore, option A is the correct answer.