Question

Suppose the capital gains tax is 28 percent and you purchased a house ten years ago for​ $80,000. If you sold the house today you would get​ $140,000. Your tax liability would be:A. indeterminate without knowing the inflation rate.
B. $16,800.
C. $39,200.
D. indeterminate without knowing the personal income tax rate.

Answer 1

Answer:

correct option is B. $16,800.

Explanation:

given data

capital gains tax = 28 percent

time period = 10 year

purchased a house = $80,000

sold house today = $140,000

solution

we get here Capital gain that is getting by the subtracting purchase price from the selling price  

Capital gain = selling price - purchase price   .............1

put here value and we get

Capital gain = $140,000 - $80,000

Capital gain = $60,000

so here we get Capital Gain Tax Amount that is express as

Capital Gain Tax Amount = Capital Gain × tax rate   ...................2

Capital Gain Tax Amount = $60,000 × 28%

Capital Gain Tax Amount = $16,800

so tax liability would be $16,800

correct option is B. $16,800.