Can you explain the meaning of "capital gains" ?

Question

As it refers to real estate.

Answer 1

capital gain is just another word for profit.

buy real estate for 100K

sell it for 120K

capital gain is 20K.

the term is also used for stocks and bonds too. its an accountants term.

you have to sell, to incur capital gain.

Answer 2

Capital gains are nothing more than how much did you sell something for versus how much you bought it for. Example, if you bought land 5 years ago for $10,000 and sold it for $20,000 your gain is that $10,000 difference. Some other questions that you have to answer are what improvements did you make to the property and their respective costs, because that can increase your basis. I would call a CPA or a free legal service to find out more concerning what your total basis is versus what you sold it for.

Answer 3

It's an increase in the realized value of your investment. If you paid $100k for a place, and spent $20k to fix and sell it for $150k, your capital gain would be $30k.

Answer 4

net revenue less adjusted basis. Adjusted basis is what you paid for it, plus improvements and betterments (but not repairs), plus title insurance, recording fees, etc., less depreciation expense for that property (note: for IRS, it's "allowed or allowable" depreciation.) Conceivably, you could have depletion costs (minerals extracted.) I believe that also reduces your basis. These tidbits are then reported to the IRS on Form 4797.