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Simple English definitions for legal terms
capital gain
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A quick definition of capital gain:
Capital gain refers to the profit made when you sell or exchange a valuable asset, such as property or stocks. It is the difference between the amount you paid for the asset and the amount you received when you sold it. For example, if you bought a stock for $100 and sold it for $150, your capital gain would be $50. This is different from ordinary gain, which refers to income earned from regular business activities. If you sell an asset for less than you paid for it, you would experience a capital loss instead of a gain.
A more thorough explanation:
Capital gain refers to the profit that is earned when a capital asset is sold or exchanged. This gain is the difference between the purchase price of the asset and the price at which it is sold or exchanged.
For example, if you buy a stock for $100 and sell it for $150, you have a capital gain of $50. Similarly, if you sell a property for more than what you paid for it, the difference is your capital gain.
Capital gains are different from ordinary gains, which are the profits earned from regular business activities. Capital losses, on the other hand, occur when a capital asset is sold for less than its purchase price.
Capital gains are an important source of income for investors and can be subject to taxes. Understanding capital gains is essential for anyone who wants to invest in assets such as stocks, real estate, or art.