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Simple English definitions for legal terms
capital return
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A quick definition of capital return:
Capital return: When you invest money, you hope to make a profit. Capital return is the money you get back from your investment that represents the repayment of the cost or capital. This money is not taxable as income. It's like getting your original investment back. For example, if you invest $100 and get $110 back, the $10 is your capital return.
A more thorough explanation:
Capital return refers to the repayment of cost or capital, which is not taxable as income. It is a revenue that represents the return of the initial investment.
- When an investor sells a stock for a higher price than they bought it for, the difference between the purchase price and the selling price is the capital return.
- A company may return capital to its shareholders by issuing a dividend or buying back its own shares.
These examples illustrate how capital return represents the repayment of the initial investment. When an investor sells a stock for a higher price than they bought it for, they are receiving a return on their initial investment. Similarly, when a company issues a dividend or buys back its own shares, it is returning capital to its shareholders.