Identify the rule dictating that on a sale of an asset a taxpayer need only include the incremental gain in gross income rather than the entire proceeds from the sale:

Question

Quizplus · Accepted Answer

The return of capital principle dictates that on a sale of an asset, a taxpayer need only include the incremental gain in gross income rather than the entire proceeds from the sale. This is because the taxpayer is recovering their original investment in the asset, which is considered a return of capital and not taxable. Any gain in excess of the original investment is considered a capital gain and is subject to taxation.

Identify the Rule Dictating That on a Sale of an Asset