Capital Gain

Capital gain refers to the increase in value of a capital asset or an investment security upon sale. In other words, if you buy company stock, real estate or fine art and then sell it for more than you paid, you have a capital gain. Capital gain is only realized upon sale, even if your investment rises in value during the time you own it.Most countries require capital gain to be reported on income tax returns, and it is taxed according to several factors, including your income tax bracket and how long you owned the asset before the selling it.. The IRS defines a short-term investment as one that was bought and sold within a year. Long-term investments are those owned for more than a year, prior to the sale. In general, you will pay the same tax rate on short-term capital gains as you would pay on your regular income, but lower capital gains tax on long-term investment sales. This encourages long-term investments that benefit the country’s economy and also means that a buy-and-hold investment strategy could have significant tax benefits.