Knowra Capital gain Capital gain A capital gain is the excess of proceeds from disposing of a capital asset over its cost or adjusted tax basis. Tax rules determine when the gain is recognized and how it is treated.
Adjusted basis : A tax measure of an asset’s investment cost, modified by specified expenditures, deductions, and other adjustments. Subtracting adjusted basis from proceeds generally determines the realized gain.
Capital asset : Property held by a taxpayer, subject to statutory exceptions that vary by tax jurisdiction. Capital-gain rules generally apply only after property qualifies as a capital asset.
Capital gains tax : A tax imposed on gains from disposing of assets, with rates and rules set by each jurisdiction. It is the principal tax consequence associated with realizing a capital gain.
Ordinary income : Income taxed under the ordinary rates and rules of a tax system rather than under a distinct capital-gains regime. The classification can produce different rates and deductions from those applied to capital gains.
Amount realized : The total value received from disposing of property, including money and the fair market value of property received. It supplies the proceeds side of the gain calculation.
Tax basis : The tax-accounting value assigned to property and used to calculate gain, loss, depreciation, or other tax consequences. Basis is the starting measure against which disposal proceeds are compared.
Capital gains distribution : A payment by an investment fund representing net gains from selling assets held by the fund. Fund investors can owe tax on distributed gains without selling their own shares.
Unrealized gain : An increase in an asset’s value that has not been locked in through a taxable disposition or equivalent event. An asset can appreciate substantially without producing a realized capital gain.
Realized gain : An economic gain measured when an asset is disposed of, before considering whether tax law recognizes it. A sale can create a realized gain even when tax rules defer recognition.
Holding period : The length of time an asset is owned for purposes of applying tax rules. In some systems, ownership duration changes a gain’s tax rate or classification.
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