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Capital Gains

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Definition:

Capital gains refer to gains on the sale of a capital asset. Capital assets are assets that you typically invest in for more than one year, such as an investment in a financial asset or real estate. If you sell a financial asset, for example, for more than you purchased it for, you realize a capital gain. If you sell a financial asset for less than you purchased it for, you take a capital loss. The tax rate on long-term capital gains is usually less than the tax rate on dividend income.

There is a specific holding period that is defined for long-term and short-term capital gains.

Examples:

Dr. Inez Franco received $100 in long-term capital gain income from XYZ, Inc. during 2010.

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