Net Proceeds

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DEFINITION of 'Net Proceeds'

The amount received by the seller after all costs and expenses are deducted from the gross proceeds arising from the sale of an asset. Depending on the asset sold, such costs may either account for a marginal percentage of the gross proceeds, or a substantial percentage of it. Capital gains taxes are generally paid only on the net proceeds of a sale, rather than the gross proceeds.

INVESTOPEDIA EXPLAINS 'Net Proceeds'

For example, in the case of a security sale, net proceeds represent proceeds from the sale minus trading costs, such as commissions. Assuming that the security seller routes the order through a discount broker for a commission of $10, the sale of 100 shares of a stock trading at $25 would result in gross proceeds of $2,500, and net proceeds of $2,490; the difference between the two is only 0.4%.
However, in the case of a real-estate sale, the difference between gross proceeds and net proceeds is likely to be significantly higher - a percentage figure in the low to mid single digits - since the seller has to pay for realtor commissions, legal fees and other closing costs.

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