Which of the following best describes a capital gain?

Which of the following best describes a capital gain?

• A. A recurring annual income
• B. The interest earned on an investment
• C. The profit made from selling an asset
• D. The tax paid on assets

Answer: (C)

A capital gain is defined as the profit made from selling an asset for more than its purchase price. This gain is realized when an asset, such as real estate, stocks, or any other investment, is sold at a price higher than what was originally paid for it. The capital gain is crucial in real estate and other investment contexts because it reflects the increase in value of an asset over time. In terms of the other options, a recurring annual income is more associated with continuous earnings, such as rental income or salary, rather than a one-time profit from asset sales. The interest earned on an investment pertains to the earnings generated from financial products like bonds or savings accounts, which is a different financial concept entirely. Lastly, the tax paid on assets is a liability related to the gain or income generated but does not define what a capital gain is. Thus, describing capital gain solely focuses on the profit realized from the sale of an asset.

A capital gain is defined as the profit made from selling an asset for more than its purchase price. This gain is realized when an asset, such as real estate, stocks, or any other investment, is sold at a price higher than what was originally paid for it. The capital gain is crucial in real estate and other investment contexts because it reflects the increase in value of an asset over time.

In terms of the other options, a recurring annual income is more associated with continuous earnings, such as rental income or salary, rather than a one-time profit from asset sales. The interest earned on an investment pertains to the earnings generated from financial products like bonds or savings accounts, which is a different financial concept entirely. Lastly, the tax paid on assets is a liability related to the gain or income generated but does not define what a capital gain is. Thus, describing capital gain solely focuses on the profit realized from the sale of an asset.