In investing, a capital gain is the profit from selling an asset for more than its purchase price.
Capital gains can arise when an investor sells shares, bonds, real estate, or other capital assets at a higher price than the asset’s adjusted cost basis. The gain is generally realized when the asset is sold; an increase in market value that has not been sold is usually called an unrealized gain.
The basic calculation is the sale proceeds minus the asset’s cost basis, with adjustments potentially affecting the result. In many tax systems, the length of time an asset was held can affect how a realized gain is treated. Rules differ by country and by asset type.
Capital gain is not the same as ordinary income, such as wages or business revenue, and it is the opposite of a capital loss. A profitable sale can still produce a smaller taxable gain if fees or eligible adjustments increase the asset’s basis.