Legal Definitions - gains

In legal and financial terms, a gain refers to the positive difference between the amount received from selling an asset and its original cost or basis. It essentially represents a profit or an increase in wealth resulting from an investment or the sale of property. Gains are often subject to taxation, with specific tax rates depending on the type of asset and how long it was held.

• Example 1: Stock Market Investment
  Scenario: An individual purchases 100 shares of a technology company for $50 per share. A year later, they sell all 100 shares for $75 per share. Explanation: The original cost of the investment was $5,000 (100 shares x $50). The selling price was $7,500 (100 shares x $75). The positive difference of $2,500 ($7,500 - $5,000) is considered a gain. This gain represents the profit made on the stock investment.
• Example 2: Sale of a Collectible Item
  Scenario: A collector buys a rare vintage watch for $10,000. After holding it for several years, the market value increases, and they sell the watch for $18,000. Explanation: The original cost of the watch was $10,000. Upon sale, the collector received $18,000. The $8,000 increase in value ($18,000 - $10,000) is the gain realized from the sale of the collectible asset.
• Example 3: Selling a Small Business
  Scenario: A small business owner spent $150,000 to establish and operate a local bakery. After five successful years, they decide to sell the entire business, including its equipment, customer list, and brand reputation, for $300,000. Explanation: The initial investment and operational costs amounted to $150,000. The sale of the business yielded $300,000. The resulting $150,000 ($300,000 - $150,000) is the gain from the sale of the business, reflecting the profit made beyond the owner's initial outlay.