Recent Examples of capital gain from the Web
That gift also brought dividends to Stewart, who in addition to a tax deduction, received a charitable annuity and avoided a capital gains tax.
Most Americans can't draw on stocks, rental properties, capital gains or significant home equity to generate cash.
Much of the unexpected revenue came from volatile sources that see-saw up and down each year, such as capital gains taxes — levies paid on investment profits — officials said.
This includes alimony, capital gains, state-tax refunds, rental income and deductions for educator expenses, student loan interest and IRA deductions.
Under state law, revenue from capital gains taxes — levies on investment profits — over a certain threshold are automatically socked away in the savings account.
Net profits are typically taxable as capital gains, which can qualify for lower rates, or as ordinary income, which is usually taxed at higher rates.
At the end of each year, they were generally closed out for tax reporting purposes, with 60 percent of their gains taxed at the lower long-term capital gains rate and 40 percent at ordinary income tax rates.
Hedge-fund managers don't merely take a share of the overall capital gains (in the range of 20%) but charge sizable ongoing expenses averaging 2% or so yearly.
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.
Financial Definition of CAPITAL GAIN
What It Is
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.
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