Capital gains exposure is the value an investment fund has gained or lost, and what that might expose the investor to, tax-wise, when they sell or convert that investment into cash. A positive gains exposure means the fund has gained, and the investor might have to pay capital tax on that gain. A negative gains exposure means the fund has lost money. That loss can get carried forward to offset future positive gains exposure.
Capital gains tax will be assessed on the total gain at the time the asset is sold. Example: Bob invested in Somnolent Spinning Inc. at $7. He promptly went to sleep and woke up 10 years later after a Princess Aurora-like slumber. Now, the stock is at $300. Bob wants to sell, but he lives in a state with high capital gains taxes. So he'd pay 40% tax on the gain of $293 per share. Bob thinks maybe it's better to go back to sleep for awhile.
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Finance: What is Capital Gains Tax?7 Views
Finance a la shmoop what is capital gains tax? alright people you've invested
your hard-earned savings from working 72 hours a week all year you put 10 grand
to work seven years ago in buying Heinz ketchup stock at 50 bucks a share
200 shares then this year along comes Warren Buffett and Berkshire Hathaway to [Warren and Berkshire appear]
confirm what a brilliant investor you were and they buy for all cash the
company Heinz ketchup for $200 a share you've made four times your money in
seven years nice work well you have a gain of 150 bucks a share which you are
gonna fully realize like you'll realize that capital gain in the form of
receiving cash like oh I realize I have cash in my bank account yay me!
so all this was so good such a nice day until you realize that you live in a [Woman frollocking in a meadow]
blue state with massive taxes and that you'll now give back about a third or
more of your investment gains that is you invested 10 grand it became 40 grand
the old-fashioned way you had 30 grand of profits and now uncle sam says i want [Uncle Sam demanding I want your cash]
your cash and you now pay about 10 grand roughly a third of it in taxes of
your gains of that 30 grand back to Uncle S, sadly you are paying back in
taxes about the same amount you invested in the first place yep lots of hard work
lots of taxes how's that feel?
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