Capital Assets

Definition

  • Item that is owned for investment or personal reasons. Such items can include stocks, bonds, collector cards, or even stamp collections. When you sell a capital asset, depending on the price, you earn a capital gain or a capital loss. Capital gains are taxed at a special rate, and losses can be used in many cases to reduce the amount that is taxed.

Synonyms
property, investment, valuables

Alternate Spellings
Capital Gain, Capital Gains, Capital loss

Related Terms and Acronyms

  • Asset Definition,
    • Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others including bank accounts, stocks, mutual funds, and so on.
  • Capital Definition,
    • Money that is used to make money; for example, to buy rental property or a business.
  • Capital Cost Allowance (CCA) Acronym, Canada,
    • Capital Cost Allowance is a method of expensing depreciable assets as defined by the Canadian Income Tax Act (ITA).
  • Capital Gain (CG) Acronym, Important,
    • The profit made by the seller when real estate or other capital assets are sold. Capital gains are taxed more favourably than earned income. However, this can be dependent on your tax bracket and the length of time you owned the asset before it was sold. You could pay approximately one-third to one-half less tax than you would pay on the same amount of earned salary.
  • Capital Gains Tax (CGT) Acronym, Canada,
    • A tax on profits from the sale of real estate or investments.
  • Capital Investments Definition,
    • Money used to purchase permanent fixed assets for a business, such as machinery, land or buildings as opposed to day-to-day operating expenses.
  • Capital Loss Definition,
    • When an asset is sold for less than what you paid, or less than its adjusted basis, it is a capital loss. However, when it comes to taxes a capital loss is not always bad because you can use it to reduce the amount of income being taxed by the amount of the loss, up to $3,000 per year. If your loss is more significant, the excess (or capital loss carryover) can be carried forward indefinitely until the total loss is used.
  • Collateral Definition,
    • Any property pledged as security for repayment of a debt.
  • Fixed Assets (FA) Acronym, Important,
    • Assets like machinery, land, buildings, or property used in operating a business that will not be consumed or converted into cash during the current accounting period.
  • Holding Period Definition,
    • The length of time a capital asset is owned. Assets held 12 months or less are short-term; those owned more than 12 months are long-term properties.
  • Investment Definition,
    • Something you put your money into in order to make money.
  • Short-Term Capital Gain (STCG) Acronym,
    • Your gain from the sale of a capital asset that you held for one year or less.
  • Short-term Capital Loss Definition,
    • Your loss from the sale of a capital asset that you held for one year or less.
  • Useful Life Definition,
    • The number of years depreciable business property is expected to be productive and in use.
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