What is classified as a capital gain?

A capital gain refers to the profit that is realized when an asset is sold for a price that exceeds its original purchase price. This is a crucial concept in finance and investing because it reflects the appreciation of an investment over time. When an investor purchases an asset—such as stocks, real estate, or other investments—and subsequently sells it for a higher price, the difference between the selling price and the purchase price is the capital gain.

This profit is often subject to taxation, which varies based on how long the asset was held (short-term vs. long-term capital gains). Capital gains are a primary source of revenue for many investors and are an important factor in evaluating the overall performance of an investment portfolio.

Other options do not accurately define capital gain: recurring income from an investment typically refers to dividends or interest received on investments, a loss incurred on the sale of an asset indicates a capital loss rather than a gain, and a fixed dividend payment represents income from shares but does not reflect changes in asset value.