Selling a security for more than its purchase price. For non-registered securities, 50% of the gain would be added to income and taxed at the investor’s marginal rate.
What is a Capital Gain?
A capital gain is the increase in the value of a capital asset, such as stocks, real estate, or a business, that results in a profit when the asset is sold. The amount of the capital gain is equal to the difference between the selling price of the asset and its cost basis, which is typically the original purchase price adjusted for any improvements, commissions, and other costs associated with acquiring and holding the asset.
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 on assets held for one year or less, and are taxed as ordinary income. Long-term capital gains are realized on assets held for more than one year, and are typically taxed at a lower rate than short-term capital gains.
Capital gains can have a significant impact on an investor’s overall return and tax liability, and are an important factor to consider when evaluating an investment. Investors may also use strategies, such as tax-loss harvesting, to manage the impact of capital gains on their portfolios.
It is important to note that not all investments result in capital gains, and some may result in capital losses. Capital losses can offset capital gains and reduce an investor’s tax liability.
