A capital loss is a decrease in the value of an investment.
A capital loss arises when the cost price is higher than the selling price.
A capital loss is a reduction in the value of a company’s capital, That is Investment, Capital assets.
Capital Loss = Purchase price- Sale price
ABC Ltd. plans on expanding its manufacturing unit. For such a purpose, the company purchases a factory worth $900,000. Ten years later, the company decides to sell the factory to upgrade to a larger one.
The business sells the factory for $840,000. Applying the capital loss formula with the information available:
The company realizes a capital loss of $60,000 from the sale.