What is capital gain?

A capital gain is the realized difference or profit on an asset when it is sold. To get capital gains, it means that the selling price would be worth more than the purchase price. A capital gain may either be realized over a fixed asset on a property or on stocks or funds. It can also be long-term (2 years or more) or short-term (one year or less).

Capital gains are usually claimed over income taxes. Speculative prices or the current market price of a property does not automatically translate as the capital gain. To realize a capital gain, the property has to be sold. If it is sold for a higher price, then there is a capital gain.

Capital gain can also be realized in a real estate property. For instance, if Company X invests in a Condominium in New York City for $30,000,000 in 2005 and then sells the property to Company Z for $50,000,000. After deducting all the expenses made on the property such as renovation, attorney fees, maintenance, the difference realized will be accrued as the capital gain over the Condominium.

The opposite of a capital gain is to make a capital loss.


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