What indicates a capital gain?

A capital gain arises when the proceeds from the sale or redemption of a capital asset exceed its adjusted cost base (ACB). In this context, the concept of paid-up capital (PUC) being greater than ACB indicates that the investment's current value is greater than what was initially paid for it, suggesting an increase in value.

When the PUC is greater than the ACB, it is a sign that the asset appreciates beyond its purchase cost, which is central to realizing a capital gain. This situation implies that upon selling or redeeming the asset, the taxpayer would record a capital gain due to this appreciation in value.

Understanding this relationship helps in tax planning and strategy, as capital gains can influence the tax liability of an individual or entity. The correct choice aligns with the fundamental principle of capital gains measurement in financial accounting and taxation.