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Capital gain

The increase in value that the owner of a capital asset receives when the asset is sold. The owner pays tax on that gain or increases, at a lower rate if the assets that are sold are capital asset, such as factory buildings, rather than assets that are sold in the normal course of business, such as inventory. Capital gain is usually associated with the sale of investments or prop- erty used for personal reason, such as cars or houses. If the asset was held for more than one year, the gain is a long-term capital gain or increase, and the tax rate is 20%, or 10% if the taxpayer is in a low tax bracket. If the asset was held for less than a year, the gain is taxed like ordinary income.

 

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