Capital Gain

Definition

  • The profit that an owner makes when selling real estate or other capital asset. Capital gains receive more favourable tax treatment than regular income. Depending on your tax bracket and on how long you held an asset before selling it, you may pay about one-third to one-half less tax than you would have paid on the same amount if you had earned it as salary. See also "Capital Asset."

Synonyms
liquidating, profit by selling assets

Acronyms
CG

Alternate Spellings
Capital Gain, Capital Asset

Related Terms and Acronyms

  • Adjusted Basis Definition,
    • The amount you use to determine your profit or loss from a sale or exchange of property.
  • Basis Definition,
    • That on which a thing rests or is founded.
    • Relating to cost basis, this is the amount assigned to an asset from which a taxpayer determines capital gain or loss. For assets purchased, the basis is the price paid. Special rules apply to assets acquired through gift or inheritance, as well as to the value of stock funds held for a period during which earnings are reinvested.
  • Capital Definition,
    • Money that is used to make money; for example, to buy rental property or a business.
  • Capital Assets Definition,
    • Items that you own for investment or personal purposes, such as stocks, bonds or stamp collections. When you sell a capital asset, depending on the price you earn a capital gain or a capital loss. Gains are taxed at a special rate, and losses can be used in many cases to reduce the amount that is taxed. See also "Capital Gain" or "Capital Loss."
  • Capital Gain Distribution Definition,
    • When the fund sells some of its assets, you receive capital gain distributions or a portion from the sale. This distribution is regarded as a capital gain, not as ordinary dividends such as the interest gained from a bank account. It is important to separate capital gain distributions from ordinary dividends because capital gains are taxed more favourably.
  • 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.
  • Current Year Capital Gains (CYCG)Acronym,
    • Exempt Capital Gains Balance (ECGB)Acronym,
      • Housing-equity Partnership Definition,
        • An arrangement in which one buyer lives in a home and the other has an ownership stake as an investment. The partners split the capital gain after the property is sold.
      • Investment Income Definition,
        • Income that is earned from investments such as interest, dividends, and capital gains.
      • Liquidation Definition,
        • To settle the outstanding debts by selling property.
        • To convert into cash.
        • The practice of selling or redistributing some or all of a business's assets in order to repay debts or pay investors if the business becomes insolvent or is sold in full or in part.
      • Long Term Capital Gain (LTCG) Acronym,
        • Your loss from the sale of a capital asset that you held for more than 12 months.
      • Long-term Capital Loss Definition,
        • Your profit from the sale of a capital asset that you held for more than 12 months.
      • Median Price Definition,
        • In a given area, the amount paid for a house in which half of the houses in that area sell for less and half sell for more.
      • Net Interest Margin (NIM) Acronym,
        • Net interest income (the difference between interest income and interest expense) as a percentage of average total assets.
      • Net Long-Term Capital Gains (NLTCG)Acronym,
        • Net Short-Term Capital Gain (NSTCG)Acronym,
          • Ordinary Dividends Definition,
            • The distribution of a company's profits that are subject to full taxation.
          • Ordinary Income Definition,
            • Income that does not qualify as a capital gain including wages, interest, dividends, and net income from a business.
          • Passive Income Definition,
            • Income coming in on a regular basis, with little or no maintenance.
          • Rate of Return (RR, ROR) Acronym, Important,
            • The profit an investment generates, expressed as equity divided by cash flow.
          • Recognized Gain or Loss Definition,
            • The amount of gain or loss reported for income tax purposes. You may be able to defer recognizing gain or loss on certain property exchanges, such as like-kind exchanges.
          • Return on Assets (ROA) Acronym,
            • A ratio that shows how profitable a company is when compared to its assets.
          • Return on Equity (ROE) Acronym,
            • A ratio that shows how profitable a company is when compared to shareholder equity.
          • Return on Investment (ROI) Acronym, Very Important,
            • The profit an investment generates, expressed as equity divided by cash flow.
          • Short-Term Capital Gain (STCG) Acronym,
            • Your gain from the sale of a capital asset that you held for one year or less.
          • Unrealized Capital Gains (UCG)Acronym,
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