Under which of the following circumstances may ‘capital gains’ arise? 1. When there is an increase in the sales of a product 2. When there is a natural increase in the value of the property owned 3. When you purchase a painting and there is a growth in its value due to increase in its popularity Select the correct answer using the codes given below:

QUESTION

Medium

Economy

Prelims 2012

Under which of the following circumstances may ‘capital gains’ arise?

When there is an increase in the sales of a product
When there is a natural increase in the value of the property owned
When you purchase a painting and there is a growth in its value due to increase in its popularity

Select the correct answer using the codes given below:

Select an option to attempt

Explanation

Capital gains arise when there is an increase in the value of a capital asset, such as real estate or an investment, that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold.

Therefore, Increased sales may lead to higher revenue and profits, but not capital gains.

However, a natural increase in the value of property owned or an increase in the value of a painting due to its increased popularity can result in capital gains when these assets are sold.

Trusted by 2L aspirants