Definition of Capital Gain
What is a "capital gain"? What is the definition of a "capital gain"?
A "capital gain" occurs when an asset increases in value after it has been purchased.
A "capital gain" is not realized until the asset has been sold.
For instance - let's say that you purchase 1,000 shares of XYZ at $10. After five years, the 1,000 shares of XYZ are now trading at $15.
In this case, you have an unrealized capital gain of $5,000 ($15,000 value - $10,000 purchase price). If you sell your sells, you will have to pay tax on your capital gain.
Different countries throughout the world treat capital gains differently. Some countries will tax capital gains at varying rates, depending on how long the asset was held or based on what type of investment was initially made.
The opposite of a capital gain? A capital loss.
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