Which of the following are considered to be capital gains?
Responses
the money lost when a stock is sold for less than it was purchased for
the new value of a stock after the market closes
the profit earned on the sale of an asset which has increased while it was owned
the interest earned from a government bond
the money lost when a stock is sold for less than it was purchased for
the profit earned on the sale of an asset which has increased while it was owned
The money lost when a stock is sold for less than it was purchased for is not considered a capital gain.
The new value of a stock after the market closes is not considered a capital gain either.
On the other hand, the profit earned on the sale of an asset which has increased while it was owned is considered a capital gain.
Lastly, the interest earned from a government bond is not considered a capital gain either.
To determine which of the following options are considered capital gains, we need to understand what capital gains are. Capital gains refer to the profit earned from selling an asset that has increased in value during the period of ownership. Based on this definition, the options that can be considered capital gains are:
1. The profit earned on the sale of an asset which has increased while it was owned.
This option matches the definition of capital gains, as it involves selling an asset and earning a profit from its increased value.
2. The money lost when a stock is sold for less than it was purchased for.
While this option involves selling a stock, it does not align with the definition of capital gains. Capital gains are only realized when there is a profit, not a loss.
3. The new value of a stock after the market closes.
This option does not involve selling an asset or earning a profit, so it is not considered capital gains.
4. The interest earned from a government bond.
Interest earned from a government bond is a form of income but is not classified as capital gains.
In summary, the only option that can be classified as capital gains is the profit earned on the sale of an asset that has increased while it was owned.