Net Proceeds

What are 'Net Proceeds'

Net proceeds are 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.

BREAKING DOWN '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. Capital Loss

    The loss incurred when a capital asset (investment or real estate) ...
  2. Net Loss

    The result that occurs when expenses exceed the income or total ...
  3. Drought Sale

    When a farmer is forced to sell more animals than in a typical ...
  4. Deferred Income Tax

    A liability recorded on the balance sheet that results from income ...
  5. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  6. Taxable Gain

    A profit on the sale of an asset that is subject to taxation. ...
Related Articles
  1. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.
  2. 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.
  3. Taxes

    Taxation Rules For Bond Investors

    Several factors affect the taxable interest that must be reported. Learn more here.
  4. Fundamental Analysis

    Calculating The Gain Or Loss On An Investment

    Calculating the percentage of change in an investment is easy. Take the amount the investment gains and divide it by the amount invested.
  5. Active Trading Fundamentals

    What Does Bid And Asked Mean?

    Bid and asked is a two-way price quotation.
  6. Investing Basics

    I Want To Start Buying Stocks: Where Do I Start?

    To buy stocks, you need the assistance of a licensed stockbroker. Today, there are four basic types.
  7. Markets

    How To Analyze A Company's Financial Position

    Find out how to calculate important ratios and compare them to market value.
  8. Investing Basics

    Ten Worst Mistakes Beginner Investors Make

    Avoiding these ten mistakes can help you steer clear of the most common ways investors lose their money.
  9. Fundamental Analysis

    4 Investment Ratios That Can Help You Make Money

    You can learn a lot about an investment’s possibilities by reading the corporation’s financial statements. But it also helps to be familiar with some basic investing ratios.
  10. Investing Basics

    Explaining Average Daily Trading Volume (ADTV)

    Average daily trading volume represents the average number of individual securities traded in a day or over a period of time.
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 Answer >>
  2. What are some of the disadvantages to taking venture capital?

    Learn how financing a business through venture capital can be a viable source of funding for small businesses but know caveats ... Read Answer >>
  3. Is the upfront cost of Class A mutual fund shares worth it?

    Learn about the differences between mutual fund share classes, and discover under what circumstances the Class A shares make ... Read Answer >>
  4. How does correlation affect the stock market?

    Learn about the role correlation plays in prudent stock market investing, and how the correlation coefficient is used to ... Read Answer >>
  5. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Answer >>
  6. What is the 'Rule of 72'?

    The 'Rule of 72' is a simplified way to determine how long an investment will take to double, given a fixed annual rate of ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center