A capital gain is the profit you make when you sell an asset for more than it cost you. Until the day you actually sell, the gain exists only on paper. Rent and dividends pay you along the way; a capital gain pays once,...
A capital gain is the profit you make when you sell an asset for more than it cost you. Until the day you actually sell, the gain exists only on paper. Rent and dividends pay you along the way; a capital gain pays once, at the exit, and only if a real buyer pays a real price.
Capital gains are the quiet engine of most East African family wealth stories. The Myth That Land Never Loses Value acknowledges the honest half of the folklore: families who bought acres on the edge of Kampala in the 1990s and simply held them are sitting on multiples of their money. That multiple is a capital gain, and over decades, in the right locations, it is real. The same mechanism drives listed shares, where patient owners collect their reward as the business compounds in value.
The catch is the word "unrealized." A gain you have not collected is a number that can still change, and the corpus documents every way it does. A forced sale surrenders twenty or thirty percent of the imagined price in a desperate fortnight. A land dispute freezes the value at zero for years. A rerouted bypass quietly cancels the future the price was built on. This is why The Quarterly Net Worth Statement imposes its honesty rules: land goes on the family balance sheet at what it would actually fetch in a 90-day sale after fees, and unit trusts at the current statement value, never at what you paid or what a broker once mentioned. An inflated gain on paper licenses spending the family cannot afford.
Families count paper gains as wealth they already have, then plan school fees, weddings, and retirements against them. The gain is a forecast, not a balance. The second misunderstanding is treating appreciation as a substitute for income. An asset bought only for capital gains pays nothing while you wait; the corpus calls bare land you are simply holding a hope, not an income asset. A family whose entire net worth is unrealized gains can be asset-rich and income-dead, unable to pay a Tuesday bill without breaking a ten-year position at the worst price of the decade.
On your next net worth statement, do two things to every asset line. First, price it at its honest 90-day value, the number a real buyer would pay this quarter. Second, mark it "pays us" or "only grows." Then read the totals: how much of the family's wealth is income now, and how much is a gain still waiting to be collected. LegacyPot's analytics module tracks the productive-asset share so the balance between the two becomes a number the family watches, and the next windfall can be pointed at whichever side is starving.