What is capital gain/loss?
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Last modified 4/24/2023 9:12:21 AM EST |
Anything that provides value or a profit to its owners falls within the broad definition of capital. The word "capital gain" describes the increase in a capital asset's value upon sale. Simply put, a capital gain occurs when you sell an asset for more than what you purchased for it.
Capital Gain = Sales Price - Purchase Price(All inclusive).
For example: If person A buys 100 shares at a rate of $50 each(total share cost $5000) and sells the same stock for $100 each(total share cost $10000), then the revenue of $5000 is considered as a capital gain.
A loss made when the value of a capital asset, such as an investment or piece of real estate, decreases is known as a "capital loss". This loss will not be realized until the asset is sold for a price less than the initial acquisition price.
Capital Loss = Purchase Price - Sale Price.
For Example: If an investor buys a car for $200,000 and sells it four years later for $150,000, the investor suffers a $50,000 capital loss.