Suppose you buy a share of stock at a price of $100 and a year later it is worth $125. Suppose further that the rate of inflation for the year is 10%. If you are subject to a 15% capital gains tax, how much would your tax burden be if you had to pay capital gains tax only on the real return on your stock

Stock (sometimes known as capital stock) in finance refers to the shares of ownership in a corporation or company.
The term "stocks" is sometimes used to refer to shares, particularly in American English.
A single share of stock represents fractional ownership of the firm based on the total number of shares.
This typically entitles the shareholder (stockholder) to that fraction of the company's earnings, proceeds from asset liquidation (after discharge of all senior claims such as secured and unsecured debt), or voting power, which are often divided in proportion to the amount of money invested by each stockholder.

The current value of stock = $100

After one year, the value of stock = $125

To find the profit gain after one year, $125 - $100 = $25.

This $25 will be considered as capital gain over stock.

Rate of tax over capital gain = 15%

Total tax burden = capital gain×rate of tax on capital gain

= $25×15%

= $3.75

Therefore, the total tax burden will be $3.75.

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