The capital gain represents an increase in the value of capital assets. In general terms, capital assets are held for the sole purpose of generating profits. The investment in assets increases their purchasing price and results in capital gains. On the contrary, the decrease in the value of capital assets results in capital loss.
Capital gains result in relation to tangible and intangible assets. One can generate profits from the sale of real assets, such as buildings and equipment, or non-physical financial assets, such as securities. The sale of intangible assets, for instance goodwill, also results in capital gains. There are two types of gains, short-term and long-term, depending on the time period the asset is held. The short-term investments are held for less than twelve months. If long-term capital assets are held longer than the period of twelve months, their purchase results in a long-term capital gain. The calculation of the period length excludes the acquisition day but includes the disposition day. This logic can be applied to capital losses.
Most countries impose taxes on the capital gains. It is a known that capital investments are one of the keys to economic growth. Capital investment is encouraged by the reduction of tax rates on the capital gains. In the United States, the top tax rate was lowered to 15 percent for individual capital gains. It has to be noted that federal and state taxation are both applicable to capital gains. Many states subject short-term capital investments to state income tax rates. Usually, the rates of taxation differ for individuals and corporations. The Capital Gains Tax is payable by individuals on profits made from the sale of capital assets. Corporations list their capital gains in the shareholders' funds on the statement of financial position.
The rate of taxation is different for the short-term and long-term capital investments. If assets are characterized as short-term capitals, the gain is deemed ordinary and not taxed at discounted capital gain rates. Long-term capital gains are eligible for the capital gain rates. The taxpayer`s bill is reduced if the capital gains are offset by capital losses.
Free charting webinar
Mon, Nov 18th, 2013 12:00 PM - 1:00 PM EST
During the 60 minute session Paul Coghlan, founder of Coghlan Capital, looks at current charts for currencies, precious metals, US indices, highlighting turns and low risk entry points using the Median line analysis methodology.
Median line analysis reduces risk and increases the chartists ability to see trend direction, trend strength and highlight entry and exit levels.
Seats are limited so be sure to reserve your spot today. The webinar will be recorded, by signing up you'll receive an email with the webinar replay afterwards.