Capital Gain

The term capital gain refers to the increase in the value of a capital asset when it is sold. Put simply, a capital gain occurs when you sell an asset for more than what you originally paid for it.

Almost any type of asset you own is a capital asset. This can include a type of investment (like a stock, bond, or real estate) or something purchased for personal use (like furniture or a boat).

Capital gains are realized when you sell an asset by subtracting the original purchase price from the sale price. The Internal Revenue Service (IRS) taxes individuals on capital gains in certain circumstances.
KEY TAKEAWAYS
-A capital gain is the increase in a capital asset's value and is realized when the asset is sold.
-Capital gains apply to any type of asset, including investments and those purchased for personal use.
-The gain may be short-term (one year or less) or long-term (more than one year) and must be claimed on income taxes.
-Unrealized gains and losses reflect an increase or decrease in an investment's value but are not considered a taxable capital gain.
-A capital loss is incurred when there is a decrease in the capital asset value compared to an asset's purchase price.