Question

Ten years ago, Ginny inherited $50,000 from her grandmother. She decided to invest all of this...

Ten years ago, Ginny inherited $50,000 from her grandmother. She decided to invest all of this money in GE stock. Suppose she decides to sell the stock today so she can purchase her first home. The sale price of the stock is $64,500. Calculate the size of Ginny's taxable capital gain.

taxable capital gain: $

Suppose that at the beginning of the ten year period the Consumer Price Index (CPI) was 125 and today the CPI is 215. Use this information calculate the value of Ginny's initial investment in terms of today's dollars.

initial investment: $

Use your calculation of the value of Ginny's initial investment to determine the difference between the initial investment in today's dollars and the sale price.

difference: $

Choose the answer that best describes the impact inflation has on Ginny's tax liability.

Inflation has increased Ginny's tax burden.

Inflation has not impacted Ginny's tax burden.

Inflation has decreased Ginny's tax burden.

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D is right option

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