What is a Capital Investment?
A capital investment is the acquisition of a fixed asset that is anticipated to have a long life of use before it has to be replaced or repaired. Two of the most easily recognizable examples of capital investments are land and buildings. However, a capital investment is made any time that a company purchases goods that will be benefit the operation of the business, but will not be used to cover the operational costs of the business. Of course, a capital investment does not have to be an asset that is along the lines of equipment or land. A capital investment can be something as simple as an amount of money that is set aside in some sort of interest bearing account. Since the resource is not being used to cover business expenses, capital assets of this type is free to be used for the purpose of generating additional revenue by accruing interest. Thus, it would be proper to consider an initial amount of money that is used to open a standard savings account as a capital asset, with the fa
Capital gains are profits you earn through buying and selling capital assets. Capital assets include things such as stocks, mutual funds, bonds, real estate, precious metals, coins, fine art, and other collectibles. Wages, interest, and dividends are considered ordinary income, not capital gains income. No Capital Gains on Tax-Deferred Investments Many people invest in stocks, bonds, and mutual funds through a tax-deferred retirement account. Individual Retirement Accounts (IRA), Roth IRA, and 401(k) plans are examples of tax-deferred accounts. Your investment profits in tax-deferred accounts are not reported as capital gains. Instead, income from these accounts is tax-deferred until the money is withdrawn, and then the income is taxed as ordinary income. (Withdrawals from a Roth IRA may be tax-free if you meet certain requirements.) Avoiding Capital Gains Tax Click here to ask us about 1031 exchange and other methods to on how to avoid Capital Gains Tax. Specializing in…. Capital Ga
