What is one characteristic of capital gains?

Capital gains represent the profit that an investor realizes when they sell an asset at a higher price than the purchase price. This gain arises from the appreciation of the asset's value over time. It is important to note that capital gains are typically derived from assets that are not part of a firm's regular operational activities. For example, if a company owns real estate or stocks that appreciate in value, the gain from the eventual sale of those assets is categorized as a capital gain.

In contrast, capital gains are not derived from activities typical of a firm's business operations, such as selling products or providing services. This distinction highlights why option B accurately captures the essence of capital gains; they come from assets whose value has increased and are sold for a profit after a period of ownership, rather than being part of a firm’s routine income generation.