Capital Gain
what is a Capital Gain
Capital gain is the profit realized from the sale of an asset such as a stock, bond, real estate, or other investment. It is calculated by subtracting the cost of the asset (also known as the “basis”) from the sale price. If the sale price is higher than the cost of the asset, the difference is considered a capital gain.
Capital gains can be short-term or long-term, depending on how long the asset was held before it was sold. Short-term capital gains are realized when an asset is sold within one year of the purchase date, and they are taxed at the individual’s marginal income tax rate. Long-term capital gains are realized when an asset is held for more than one year before it is sold, and they are typically taxed at a lower rate than short-term capital gains.
Types of capital gains
Realized capital gains
Realized capital gains are when an asset is solid and capital gain realized.
unrealized capital gains
unrealized capital gains are when an asset is held and its value has increased, but it has not been sold yet.
It’s important to note that capital gains are taxable events, and it’s important to keep track of them and report them to the tax authorities. It’s also important to consider the tax implications of selling an asset and to consult a tax professional or financial advisor to understand how capital gains will affect your taxes.
In addition, some assets are considered short-term capital assets if they are held for less than 12 months.
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Based on the holding period of the asset, the return on investment can be broadly classified into the following types –
Capital Gains Calculation
To calculate capital gains, you must be familiar with some important terms.
