Capital gain
A capital gain refers to profit that results from a sale of a capital asset, such as stock, bond or real estate, where the sale price exceeds the purchase price. The gain is the difference between a higher selling price and a lower purchase price.[1] Conversely, a capital loss arises if the proceeds from the sale of a capital asset are less than the purchase price.
Capital gains may also refer to a different form of profit received from an asset that refers to "investment income" in the form of cash flow or passive income that arises in relation to real assets, such as property; financial assets, such as shares/stocks or bonds; and intangible assets.
Taxation of capital gain
Most countries impose a tax on capital gains of individuals or corporations. There are typically significant differences in the taxation of capital gains earned by individuals and corporations, and the OECD recognises three simple categories of individual capital income which are taxed by its member nations around the world. These include dividend income, interest income and capital gains realised through property and shares.[2]
Exemptions and opinions on exemptions
Tax relief or exemptions may be available for capital gains in relation to holdings in certain assets such as significant common stock holdings. Reasons for such exemptions are to provide incentives for entrepreneurship, to compensate for the effects of inflation, or to avoid "double taxation".[3]
Capital gain in national income accounting
Capital gains or losses are not counted during national income accounting as they only pertain to transference of rights to shares and assets and hence do not correspond to any new production activity.[citation needed].
See also
References
- ^ O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 268, 508. ISBN 0-13-063085-3.
{{cite book}}: CS1 maint: location (link) - ^ Harding, Michelle. 2013. "Taxation Of Dividend, Interest, And Capital Gain Income". OECD Taxation Working Papers No. 19. OECD Publishing.
- ^ "President Discusses Taking Action to Strengthen America's Economy". georgewbush-whitehouse.archives.gov. Retrieved 9 April 2018.
Further reading
- Black, Stephen (2011). "A Capital Gains Anomaly: Commissioner v. Banks and the Proceeds from Lawsuits". St. Mary's Law Journal. 43: 113. SSRN 1858776.
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