Tax990 Knowledge Base

What is capital gain/loss?

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.