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capital gain |
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Capital gain When a stock is sold for a profit, the capital gain is the difference between the net sales price of the securities and their net cost, or original basis. If a stock is sold below cost, the difference is a capital loss.
Capital gain. When you sell an asset at a higher price than you paid for it, the difference is your capital gain. For example, if you buy 100 shares of stock for $20 a share and sell them for $30 a share, you realize a capital gain of $10 a share, or $1,000 in total. If you own the stock for more than a year before selling it, you have a long-term capital gain. If you hold the stock for less than a year, you have a short-term capital gain. Most long-term capital gains are taxed at a lower rate than your other income while short-term gains are taxed at your regular rate. There are some exceptions, such as gains on collectibles, which are taxed at 28%. The long-term capital gains tax rates are 15% for anyone whose marginal federal tax rate is 25% or higher, and 5% for anyone whose marginal rate is 10% or 15%. You are exempt from paying capital gains tax on profits of up to $250,000 on the sale of your primary home if you're single and up to $500,000 if you're married and file a joint return, provided you meet the requirements for this exemption. capital gain The taxable gain recognized from the sale of a capital asset. It is the difference between the sale price of the property and the adjusted basis.Tax laws routinely offer preferential treatment for long-term capital gains on property held for a certain period of time before sale. Capital gains may be offset by capital losses. Capital Gain What Does Capital Gain Mean? (1) An increase in the value of a capital asset (investment or real estate) above its purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than one year) and must be reported for tax purposes. A capital loss is incurred when there is a decrease in the capital asset value below the purchase price of an asset. (2) The profit that results when the price of a security held in a mutual fund rises above its purchase price and the security is sold (realized gain). If the security continues to be held, the gain is unrealized. A capital loss occurs when the opposite takes place. Investopedia explains Capital Gain (1) Long-term capital gains usually are taxed at a lower rate than is regular income or dividends. This is done to encourage entrepreneurship and investment in the economy. (2) Tax-conscious mutual fund investors should check a mutual fund's unrealized accumulated capital gains, which are expressed as a percentage of its net assets, before investing in a fund that may have a significant unrealized capital gain component. This circumstance is referred to as a fund's capital gains exposure. When a fund distributes capital gains, the mutual fund's owners are liable for the tax. Related Terms: Capital Gain The gain from the sale or exchange of a capital asset. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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However, a great deal of annoyed surprise may appear on the faces of those that discover an issue known as a capital gains tax. It works like this: If you sell a home that has been your primary residence for two out of the last five years you can exclude up to $500,000 in capital gains from income tax. A profit on the sale of a capital assets held longer than 12 months, and eligible for long-term capital gains tax treatment. |
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