Glossary - Capital Gain
Capital gain refers to the increase in value of an asset or investment over time from its purchase price. This gain is realized when the asset is sold at a higher price than its original purchase price. It is a key consideration in investment and tax strategy, as capital gains are usually subject to taxation at varying rates depending on the jurisdiction and the length of time the asset was held.
Also known as
- Profit
- Investment Gain
Use cases examples
- Tax Return: Reported a capital gain of $15,000 from the sale of stock investments on the annual tax return form.
- Investment Portfolio Statement: The portfolio statement showed a capital gain of 20% on the real estate investment trust over the past fiscal year.
Considerations for investors
- Considering the impact of capital gains tax on investment returns and structuring investments to minimize tax liability.
- Evaluating the holding period for investments to qualify for long-term capital gains treatment which often has a lower tax rate compared to short-term gains.
Considerations for founders
- Understanding how capital gains tax can impact the net proceeds from the sale of company assets or investments.
- Strategies for timing the sale of assets to optimize for favorable tax treatment of capital gains.
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