In short, a capital gain is a profit gained from an investment. It can be a capital gain or loss. When you sell a business, the capital gain is the difference between the original cost and the sale price.
Things such as equipment depreciation can help reduce the capital gain. The cost of capital improvements may also impact the net profit.
For example, you bought a business for $200,000 and built an addition at a cost of $100,000. The purchase price for the business was $350,000. You’d owe capital gains on the $50,000.
You can have a gain or loss. Using the same example, the purchase price is $250,000. You have a $50,000 loss.