Which equation represents the calculation of a capital gain?

The calculation of a capital gain is determined by the difference between the selling price of an asset and its basis. The basis generally refers to the original value invested in the asset, which includes the purchase price plus any additional costs associated with acquiring or improving the asset.

In this context, the correct equation for calculating capital gain is the selling price minus the basis. This formula allows a taxpayer to understand how much profit has been made on the sale of an asset. If the selling price exceeds the basis, the result is a capital gain, indicating a profit from the sale.

This definition aligns directly with capital gains tax regulations, where the goal is to ascertain the profit earned from the sale of an asset, which is taxable. Understanding this calculation is crucial for tax reporting and financial planning, as it helps distinguish between gains and losses for taxation purposes.