What is a capital gain?
A capital gain results when you sell certain property at a profit. In general, everything you own for investment or personal purposes is a capital asset, including your, stocks, bonds, collectibles, and home. Capital assets do not include business property, such as accounts receivable, inventories, and notes. Long-term capital gains (generally gains on assets held more than one year) receive more favorable tax treatment than ordinary income. For example, the maximum long-term capital gain rate is currently 15%, whereas most ordinary income tax rates are much higher.
Income resulting from the sale of a capital asset is called capital gain. Gain from the sale of securities held for investment, such as the sale of stock acquired by the exercise of an NQSO or sale of ISO stock held for one year from exercise and two years from grant, is a type of capital gain. The taxation rate on the gain from the sale or exchange of a capital asset depends on the type of asset and how long it was held. You are required to file a Schedule D, Capital Gains and Losses form, with your federal IRS 1040 tax return for any tax year in which you sell stock, whether or not you have a capital gain.
