======Proceeds from Sale======
Proceeds from Sale refers to the total amount of money received from selling an [[asset]]. Think of it as the top-line number you see right after you hit the "sell" button on your [[brokerage]] account. Whether you're offloading [[shares]] of a company, a [[bond]], or even a piece of real estate, the cash that flows back to you from the buyer is your [[gross proceeds]]. This figure is a critical starting point, but it's not the end of the story. It represents the total sale price //before// any deductions are made. These deductions can include transaction costs like commissions, fees, and taxes. Understanding the difference between what you get initially (gross proceeds) and what you actually get to keep and reinvest (net proceeds) is fundamental to tracking your investment performance and making smart decisions about your capital. For a savvy investor, the proceeds from one successful investment are simply the seed money for the next.
===== Decoding the Numbers: Gross, Net, and Tax =====
It's easy to get excited by the big number from a sale, but the devil is in the details. To truly understand your investment outcome, you need to break down the proceeds.
==== Gross vs. Net Proceeds ====
The most important distinction to make is between gross and net proceeds.
  * **Gross Proceeds:** This is the total sale price of your asset. If you sell 100 shares for $50 each, your gross proceeds are $5,000 (100 x $50). It's the simple, headline figure.
  * **Net Proceeds:** This is the real-world cash that lands in your pocket. It's what's left after you subtract all the costs associated with the sale. Think of it as: **Net Proceeds = Gross Proceeds - Selling Costs**. These costs can include:
    * [[Brokerage fees]] or commissions
    * Legal and administrative fees
    * Transfer taxes (especially common in real estate)
Your [[net proceeds]] are the actual amount of capital you have available to deploy into your next great investment idea.
==== The Tax Man Cometh: Proceeds and Capital Gains ====
Here’s a crucial point many new investors miss: **you don't pay tax on your proceeds**. You pay tax on your //profit//. This profit is known in the investment world as a [[capital gain]].
To figure out your capital gain, you need one more number: your [[cost basis]]. This is the original price you paid for the asset, including any commissions you paid when you bought it.
The formula is simple: **Capital Gain = Net Proceeds - Cost Basis**
If the result is positive, you have a gain and will likely owe [[capital gains tax]]. If it's negative, you have a [[capital loss]], which can often be used to offset other gains for tax purposes. The tax rate you pay depends on how long you held the asset. Selling an asset you've held for a year or less typically results in [[short-term capital gains]], which are taxed at a higher rate than [[long-term capital gains]] from assets held for more than a year.
===== A Value Investor's Perspective =====
For a [[value investor]], proceeds from a sale aren't just an exit; they're a transition. The legendary investor [[Warren Buffett]] doesn't sell a business just to hoard cash. He sells when the business is no longer undervalued or when he finds a significantly better place to put that capital to work.
The net proceeds are the lifeblood of this strategy. They represent freed-up capital ready for [[reinvestment]]. The goal is to take the cash from a fully-valued or over-valued asset and redeploy it into a new, undervalued opportunity. This disciplined cycle of buying low, selling high, and reinvesting the proceeds is the engine of long-term [[compounding]]. Every sale is a strategic decision weighed against [[opportunity cost]]—the potential return you're giving up by not staying in the old investment versus the potential return of a new one.
===== A Practical Example =====
Let's walk through a scenario with our investor, Jane.
  - **Step 1: The Sale.** Jane decides to sell her 200 shares of Acme Inc., which are now trading at $80 per share.
  - **Step 2: Calculate Gross Proceeds.** Her gross proceeds are the total sale value: 200 shares x $80/share = **$16,000**.
  - **Step 3: Account for Costs.** Her online broker charges a flat $10 commission for the trade.
  - **Step 4: Calculate Net Proceeds.** Her net proceeds are what she can actually reinvest: $16,000 - $10 = **$14,990**. This is the cash that will appear as "available to invest" in her account.
  - **Step 5: Calculate the Capital Gain.** Jane is a smart investor and knows her cost basis. She bought the shares several years ago for a total of $6,000 (including the initial purchase commission). Her taxable capital gain is: $14,990 (Net Proceeds) - $6,000 (Cost Basis) = **$8,990**.
Jane will owe long-term capital gains tax on her $8,990 profit, //not// on the full $16,000 of proceeds. She now has $14,990 in fresh capital to hunt for her next value opportunity.