capital gain

noun

Definition of capital gain

: the increase in value of an asset (such as stock or real estate) between the time it is bought and the time it is sold

Examples of capital gain in a Sentence

Recent Examples on the Web

In the 6th District, which includes part of Spokane, Democratic state Senate candidate Jessa Lewis wants to cut property taxes, possibly through a tax on capital gains. Joseph O’sullivan, The Seattle Times, "Beyond Seattle, legislative candidates try to woo voters with plans to ease housing costs," 2 Sep. 2018 On Thursday, the state revenue commissioner announced that for the first 11 months of the fiscal year, through May 31, capital gains income was $322 million higher than that threshold. Joshua Miller, BostonGlobe.com, "The state is putting some decent cash into its rainy day fund. Finally," 28 June 2018 The push for donors will likely get a boost from the fact cryptocurrency donations are tax deductible, and many of the largest holders are sitting on sizable capital gains. Jeff John Roberts, Fortune, "Coinbase CEO Launches Crypto Charity Fund, Aims to Raise $1 Billion," 27 June 2018 That transaction, made by Mr. Kushner and a trust benefiting Ms. Trump, yielded more than $5 million in capital gains income in 2017, according to the disclosure. Julie Bykowicz, WSJ, "Jared Kushner Reports Wealth After First Year in White House," 11 June 2018 The tax code already confers a lot of benefits upon capital gains income. Jonathan Chait, Daily Intelligencer, "Trump Economist Wants to Give Rich People Another Tax Break, Without a Vote in Congress," 20 Mar. 2018 No capital gains at death: Assets held at death still aren’t subject to capital-gains tax. WSJ, "WSJ Tax Guide 2019: Estate and Gift Taxes," 15 Feb. 2019 From the Americas, to Africa, the Caribbean, Asia, and Oceania, Europeans wreaked havoc on livelihoods for their own capital gain. Rachel Elizabeth Cargle, Harper's BAZAAR, "Megyn Kelly's "Blackface" Comments Reveal a Larger Truth About Appropriation," 30 Oct. 2018 If stakeholders keep that investment for five to seven years, their capital gains tax liability will drop by 10 percent. Joshua Fechter, San Antonio Express-News, "Texas cities vie for billions as mayors apply for Trump ‘opportunity zone’ tax breaks," 21 Mar. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'capital gain.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of capital gain

1921, in the meaning defined above

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Last Updated

12 Mar 2019

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The first known use of capital gain was in 1921

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More Definitions for capital gain

capital gain

noun

Financial Definition of capital gain

What It Is

A capital gain is an increase in the value of an investment. It is the difference between the purchase price (the basis) and the sale price of an asset.

How It Works

The formula for capital gain is:

Sale Price - Purchase Price = Capital Gain

Note that this formula assumes the sale price is higher than the purchase price. If an investor sells an asset for less than he or she paid, this is called a capital loss.

Let's assume you purchase 100 shares of XYZ Company for $1 per share. After three months, the share price increases to $5. This means the value of the investment has increased from $100 to $500, for a capital gain of $400.

Why It Matters

Capital gains are taxable, but only when they are realized. That is, they only become taxable when the asset is sold. Until that point, any gains are considered unrealized and are not taxable. The IRS considers nearly every asset owned by individuals and companies as capital assets and thus they are subject to capital gains taxes.

Taxpayers report capital gains on IRS Schedule D, but these gains are subject to different tax rates depending on whether they are short term or long term (and in some cases depending on the type of asset). In the example above, if you sold the XYZ Company shares after a year, the IRS would consider your $400 profit a long-term capital gain and would tax it at one of several lower, flat rates. However, if you sold the XYZ Company shares after just three months, the IRS would consider your $400 profit a short-term capital gain and tax that $400 at your ordinary income tax rate, which is generally higher than the long-term capital gains tax rate. This system encourages long-term investing, but there are many reasons an investor might want to sell an asset before a year has passed.

Some retirement vehicles, such as 401(k)s and IRAs, allow investors to buy and sell assets within these vehicles without becoming subject to capital gains tax. This tax deferral effectively gives investors a larger balance on which to compound interest or returns, with capital gains tax applying only when the investor begins to make withdrawals.

An investor's capital losses sometimes will offset all or a portion of his or her capital gains, lowering the investor's tax bill. There is a limit, however, to how much the investor can offset. Note also that the IRS does not treat the distributions of net realized long-term capital gains, like those from a mutual fund, as capital gains. The IRS treats those as ordinary dividends.

Source: Investing Answers

capital gain

Legal Definition of capital gain

see gain

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