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Simple English definitions for legal terms
gains
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A quick definition of gains:
Definition: Gains are the extra money you make when you sell something for more than you paid for it. For example, if you buy a toy for $5 and sell it for $10, you made a gain of $5. Different things you sell can have different gains or losses, and you might have to pay taxes on your gains. When you sell something that you've owned for a long time, like a house or a piece of land, you might have to pay a different kind of tax called a "section 1231 gain." If you sell something that you bought as an investment, like a stock or a piece of art, you might have to pay a different kind of tax called a "capital gain."
A more thorough explanation:
Gains refer to the profit or increase in value that an investment or asset generates beyond its basic expenses. When an asset is sold, the difference between the selling price and the purchase price is considered a gain or loss. The tax rate for gains or losses varies depending on the type of asset and the duration of ownership.
- If you buy a stock for $100 and sell it for $150, the gain is $50.
- If you purchase a rental property for $200,000 and sell it for $250,000 after holding it for more than a year, the gain is considered a "section 1231 gain" and is subject to a different tax rate.
- If you sell a piece of artwork for $10,000 that you bought for $8,000, the gain is $2,000.
These examples illustrate how gains are calculated by subtracting the purchase price from the selling price. The tax rate for each gain will depend on the type of asset and how long it was held before being sold.