Capital Gain

When a capital asset increases in value over a period of time (a process called "appreciation") the financial term to describe the enhanced worth of the asset is "capital gain." This is the value of the capital asset in excess of the price originally paid for the asset. On the other hand, the depreciation or decline in value of a capital asset from the price paid for the asset is referred to as "capital loss."

As per section 1222 of the United States federal tax code, capital gains on real assets, (for example real estate), those generated on financial assets (such as stocks and securities) and gains from the sale or exchange of personal property, are all subject to federal taxation. If the asset in question is held for a period longer than one year, the asset is normally taxed at the long-term capital gain tax rate of 15 percent.

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