Net Proceeds

AAA

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.

RELATED TERMS
  1. Formal Tax Legislation

    The process by which a proposed tax rule or tax change may become ...
  2. Net Loss

    The result that occurs when expenses exceed the income or total ...
  3. Capital Loss

    The loss incurred when a capital asset (investment or real estate) ...
  4. Closing

    The end of a trading session. The closing of a trading day halts ...
  5. Land Value

    The value of a piece of property, including both the value of ...
  6. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
RELATED FAQS
  1. What is the double taxation of dividends?

    After all is said and done, companies that have made a profit can do one of two things with the excess cash. They can (1) ... Read Full Answer >>
  2. How do I place an order to buy or sell shares?

    It is easy to get started buying and selling stocks, especially with the advancements in online trading since the turn of ... Read Full Answer >>
  3. Is there a difference between financial spread betting and arbitrage?

    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>
  4. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  5. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  6. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
Related Articles
  1. Taxes

    The Impact Of U.S. Corporate Taxation On Investment Decisions And CFC Transfer Pricing

    To avoid taxation, businesses do careful tax planning, taking into consideration more than one country's taxation system.
  2. Taxes

    Taxation Rules For Bond Investors

    Several factors affect the taxable interest that must be reported. Learn more here.
  3. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.
  4. Investing

    The Number One Reason Why Most Traders Fail

    We show you the simple tools, availble to everyone, to succeed as an active trader: education, experience, charts, vision, and risk management systems.
  5. Investing Basics

    What Does It Mean When an Investment Outperforms?

    Stock analysts use the term “outperform” to rate a stock.
  6. Investing Basics

    How Does Dilution Work?

    Dilution refers to the reduction in the percentage equity ownership of a company due to additional equity being issued to other owners.
  7. Investing

    Looking To Begin Trading In The Stock Market?

    If you are a new trader, we explain the differences between penny stocks and options so you can make the best decision for your personal trade plan.
  8. Personal Finance

    Financial Tips For People Who Hate Finance

    For people who hate financial planning, there's usually one big problem – which you can fix. Do it now.
  9. Investing

    Seven Investing Books For Your Summer Reading List

    It’s almost 4th of July, the season of summer reading. Picking up a book during your holiday can be a great opportunity to learn more investing.
  10. Trading Strategies

    Knowing When To Hold And When To Sell

    When deciding whether to sell or hold on to a stock, use the "partial sell" strategy as a way to minimize risks and ensure that you make some profits.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!