CAPITAL GAINS AND LOSSES

A capital gain is the amount by which an asset's (stock, bonds, real estate etc) selling price exceeds its initial purchase price. Conversely, capital loss arises if the proceeds from the sale of an asset is less than the purchase price.

Capital gains are of 2 types namely realized capital gains and unrealized capital gains.
Realized capital gain is the gain made on an investment that has been sold for a profit while unrealized capital gain is the gain on an investment that has not been sold yet but can make profit if sold later.

Unrealized gains or losses are referred to as paper gains or paper losses as they reflect an increase or decrease in an investment's value. For example
Case 1 capital gain:

Suppose an investor purchased 200 units of stock at # 100.00 each totaling #20000.00. After a period of say 6 months, if he sells these shares for #150.00 each, it would result in a profit of #10000.00. This amount is called capital gain.

Case 2 capital loss:
If after a 6-month period, the investor sells these shares for #80.00 each, realizing #16000.00, thus suffering a loss of #4000.00. This amount he suffers is what is called a capital loss.

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