If you sell a stock at a loss, what is the loss called?
(1 point)
inflation
capital gain
stock loss
capital loss
capital loss
If you sell a stock at a loss, the loss is called a capital loss.
The loss that occurs when you sell a stock for less than the price you paid for it is called a "capital loss."
To understand this concept, it's important to have a basic understanding of how stocks work. When you buy stocks, you become a partial owner of the company. The value of your stocks can fluctuate based on various factors such as market conditions, company performance, and investor sentiment.
When you sell a stock, the difference between the selling price and the price you originally paid for it is your capital gain or loss. If you sell the stock for a higher price than what you paid, you have a capital gain. However, if you sell the stock for a lower price, you incur a capital loss.
Capital losses can be used to offset capital gains for tax purposes. If you have more capital losses than gains, you may be able to deduct the excess losses from your taxable income, reducing your overall tax liability. This is known as tax-loss harvesting and can be beneficial for investors.
Understanding terminology like "capital loss" can help investors comprehend the financial implications of buying and selling stocks.