Real vs Nominal and Taxes

[pokhim]

This has probably been asked a thousand times every single year. But just so that i get certainty on this. I am trying to calculate nominal before tax return from real return, the tax rate and inflation.
Is it:
[Real Return (after tax)+ Inflation ] / 1-T = Nominal Return (before tax)
or
[Real Return (after tax) / 1-T] + inflation = Nominal Return (before tax)

 

[cpk123]

please read S2000’s note on this.
I believe the characteristics of the account need to be looked at too!
the 1st equation - the inflation is also being taxed … while in the 2nd one - Inflation is not being taxed.

 

[pokhim]

cpk123 wrote:
please read S2000’s note on this.
I believe the characteristics of the account need to be looked at too!
the 1st equation - the inflation is also being taxed … while in the 2nd one - Inflation is not being taxed.

thanks. Do you know where the link to the note is?…

 

[cpk123]

http://financialexamhelp123.com/inflation-in-required-rate-of-return-to-tax-or-not-to-tax/

 

[pokhim]

superb! thanks!