How to account for inflation when converting pre-tax to post-tax return

CFA Level III
#1

I have seen two approaches from multiple sources:

  1. Pre-tax nominal * (1-t) = Post-tax real + Inflation

  2. (Pre-tax nominal - Inflation) * (1-t) = Post-tax real

The 2nd approach is from CFA (2018 mock exam question 6-C answer key).

Which approach is right?

Do you always account tax first or inflation first?

#2

http://finexamhelp123.wpengine.com/inflation-in-required-rate-of-return-to-tax-or-not-to-tax/

The short answer is: read the vignette. It will tell you whether or not inflation is taxed.

#3

I read it, think I am still confused.

Will read again some other time