What is defined as the profit taxpayers receive when they sell a capital asset?

The profit taxpayers receive when they sell a capital asset is termed a capital gain. This occurs when the selling price of the asset exceeds its purchase price, signifying that the taxpayer has made a profit on the investment. Capital gains can arise from various types of assets, including stocks, real estate, and collectibles.

Understanding capital gains is essential because they can have different tax implications compared to other forms of income. For example, long-term capital gains (from assets held longer than one year) are often taxed at a lower rate than ordinary income, which encourages long-term investment strategies.

In contrast, capital losses occur when an asset is sold for less than its purchase price, which, while important for tax calculations (as they can offset capital gains), does not describe the profit situation posed in the question. Gross income encompasses all income received before any deductions or expenses, and taxable income is the amount of income that is subject to taxes after deductions. These terms do not specifically relate to the profit from selling a capital asset as capital gain does.