Definition

Noun: The profit earned from the sale of a capital asset, such as stocks, bonds, or real estate. It is calculated as the difference between the asset's selling price and its original purchase price (or cost basis). This gain is only realized and subject to taxation when the asset is sold.

Usage

This term is used primarily in financial, investment, and tax contexts to describe the positive financial return on an investment upon its sale. * You report your capital gain on your annual tax return. * The investor's primary goal was to achieve a long-term capital gain. * The tax rate for a short-term capital gain is often higher.

Examples

• Selling the vintage car for $50,000 resulted in a significant capital gain over its original purchase price.
• Her capital gain from the stock sale was reinvested into a new fund.
• Understanding the difference between a capital gain and dividend income is crucial for investors.

Advanced Usage

• Realized vs. Unrealized Gain: A capital gain is only "realized" upon the sale of the asset. An increase in value that is not yet sold is an "unrealized" or "paper" gain.
  • He has an unrealized capital gain on his shares, but he won't owe tax until he sells them.
• Capital Gain Distribution: Some investment funds distribute their own realized gains to shareholders, who must then report it as a capital gain.
  • The mutual fund's year-end capital gain distribution was larger than expected.

Variants and Related Words

• Capital Loss (n): The loss incurred when a capital asset is sold for less than its purchase price.
  • He used the capital loss to offset his other gains for the year.
• Capital Gains Tax (n): The tax levied on the profit from the sale of a capital asset.
  • The new law changed the rates for capital gains tax.

Synonyms

• Profit on sale
• Investment gain
• Realized profit

Related Phrases

• Short-term capital gain: A gain on an asset held for one year or less.
  • Short-term capital gains are taxed as ordinary income.
• Long-term capital gain: A gain on an asset held for more than one year, typically taxed at a lower rate.
  • Holding the stock for over a year qualified the profit as a long-term capital gain.
• Net capital gain: The total amount of capital gains minus capital losses for a tax period.
  • Her net capital gain for the year was modest after accounting for several losses.

Noun

1. the amount by which the selling price of an asset exceeds the purchase price; the gain is realized when the asset is sold