Wang owns 30% of chen and at December 31, 2015 the balance in Wang's investment account equals $400,000. On January 1, 20216 Wang purchases an additional 40% ownership in Chen for $600,000, bringing Wang's ownership up to 70%. Wang will Dr. Investment in Chen for $600,000 and Credit Cash for $600,000. What additional entry will Wang be required to make to reflect the increase in ownership?

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.