Capital Gain

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Definition of a Capital Gain:

A capital gain occurs when a capital asset appreciates in value. 

Detailed Explanation:

A capital gain is realized when an asset is sold for a profit. For example, when a family purchases a home for $200,000 and sells it three years later for $350,000, the family has a capital gain of $150,000. 

How much would you pay for a share of stock of a company that does not pay a dividend? Would you invest $50? How about $800? It depends. If you anticipate the company’s earnings will grow and the stock value will follow, you may buy a stock expecting a capital gain. However, if you expect the company’s profits to remain flat, you would probably not purchase the stock. An investor realizes her capital gain (or loss) after selling the investment and may be obligated to pay a capital gains tax. 

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