Capital Loss

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Definition of a Capital Loss:

A capital loss occurs when a capital asset decreases in value.

Detailed Explanation:

A capital loss is realized when an asset is sold for a loss. For example, when a family purchases a home for $200,000 and sells it three years later for $150,000, the family has a capital loss of $50,000. 

How much would you pay for a company that does not pay a dividend? Would you pay $50? How about $800? It depends. If you anticipate the company’s earnings will grow and the stock value will follow, then you may buy a stock expecting a capital gain. However, if you are wrong and the value of the company’s stock decreases from the price you purchased it for you have a capital loss.

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