Capital Loss

The loss faced by an investor when his/her capital asset depreciates in value is termed as capital loss. The loss is incurred when the asset is sold for a price which is less than the purchase price. Capital loss is calculated as the difference between the original purchase price and the value at which the investor sells the asset, the selling price being lower than the purchase price. For example, if you buy a property at a price 300,000 $ and sell it at 250,000$, then you will incur a capital loss of 50,000$. Sometimes, an investor sets off capital losses against capital gains for the purpose of reducing tax liability. The rules impose upon capital losses differ from country to country. In accordance with the time period of holding the assets, you can define capital loss as either short term or long term. Capital loss on investment that are hold for less than one year are defined as short term and on assets that are hold for more than a year are said to be long term.

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Edited and Updated 31st May 2014

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