Final answer:
The taxable amount of a capital gain is the amount by which the proceeds from the sale exceed the asset's adjusted cost base, and it is commonly taxed at a certain percentage (like 50% in Canada). Determining taxable income involves calculating the adjusted gross income and subtracting deductions and exemptions.
Step-by-step explanation:
The taxable amount of a capital gain is correctly calculated as the amount by which the proceeds realized on the sale of an asset exceed its adjusted cost base (option A). Tax laws then determine the percentage of this gain that is considered taxable. In many tax jurisdictions, this includes a specific percentage of your capital gains added to your taxable income. For example, Canada taxes 50% of the realized capital gains, thus if a financial investor buys a share of stock at $45 and later sells it for $60, the capital gain is $15. Assuming the investor is in Canada, the taxable capital gain would be 50% of the $15, which is $7.50.
In general, determining taxable income involves calculating the adjusted gross income and then subtracting deductions and exemptions. Various tax credits and the potential application of the alternative minimum tax can also affect the final tax liability.