You bought SHMO (our stock ticker, should we ever go public) at $12. You held it a year, and a year later it was at $14. Your capital (the 1,000 shares of our awesome stock you bought for 12 grand) returned a capital yield of 2/14, or about 14.3%.
That's before tax. And that presumes you sell all of our stock that moment. And that there are no commissions. But notionally, anyway, your capital gains yield would have been the 14.3% thing...and note that it also presumes we don't pay a dividend. If we did, that'd not be a part of the calculation here. This 14.3% applies only to the appreciation of the stock price...nothin' else.
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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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