Question
© 00:04:15 Question \#7 of 15 Capital gain is defined as the difference between the adjusted basis of property and its return on investment. True False
Ask by Bright Parry. in the United States
Mar 10,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
Capital gain is not the difference between the adjusted basis and the return on investment. It is the difference between the selling price and the adjusted basis. Therefore, the statement is **False**.
Solution
1. The standard definition of capital gain is the difference between the selling price (or amount realized) of a property and its adjusted basis, not the return on investment.
2. In mathematical terms, if we let \( S \) be the selling price and \( B \) be the adjusted basis, the capital gain \( G \) is given by:
\[
G = S - B
\]
3. The statement in the question incorrectly states that capital gain is defined as the difference between the adjusted basis and the return on investment. The return on investment is a separate measure that typically refers to the percentage gain or loss relative to the initial investment.
4. Therefore, the given statement is false.
Final answer: **False**.
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Simplify this solution Extra Insights
Capital gain is actually defined as the difference between the selling price of an asset and its original purchase price (or adjusted basis). So, in this case, the answer is False! When you sell an asset for more than what you paid, the profit you make is your capital gain. It’s a crucial concept to understand, especially when dealing with investments like stocks or real estate, because it can have significant tax implications. Happy investing!
